Opinion: Kaleidoscope Of Options Intrigues AirTouch Watchers
From the January 11, 1999 issue of Wireless Week
By Judith Lockwood
Last week's international bidding war over star performer AirTouch Communications Inc. was all the buzz, even though it was well known that the four parties each had engaged in some form of flirtation for awhile. The question is, will a fourth national carrier be a good thing for the industry and consumers? The answer is yes, and besides, it's inevitable.
With an explosion of up to a dozen mobility providers in each city (counting the independent wireless operators, the three narrowband paging companies and satellite licensees such as Iridium), the industry begs for streamlining that ensures a future for about half that many competitors. Consumers deserve solid national coverage and attractive pricing, two benefits when carriers realize the efficiencies from pooling their R&D, billing, marketing and other costs.
Those simple facts have driven wireless consolidation to date: Think of the vast PacBell, SNET and Ameritech business that SBC is absorbing; the Nynex mobile operations already part of AirTouch suitor Bell Atlantic's fold, not to mention the mobile business the Bell gets as part of its proposed GTE acquisition; or smaller buyouts like AT&T Wireless Services Inc.'s purchase of Vanguard Cellular late last year.
While potential creation of a fourth national carrier isn't a new concept, something felt different about the events of last week. Maybe it was:
• The magnitude of a bidding contest in an industry that not too many years ago was considered a poor cousin to wireline.
• The fact that Vodafone's $50 billion stock-and-cash bid for AirTouch was the first major acquisition proposal by a foreign carrier under relaxed foreign ownership rules that went into effect Jan. 1.
• The ideafavored by many wireless insidersthat to command a higher price, AirTouch should split its properties, selling the domestic operations to Bell Atlantic and the foreign business to Vodafone.
• Speculation that Vodafone could first purchase AirTouch, then follow up by buying the U.S. global system for mobile communications carriers, overripe for consolidation.
• The possibility that fencesitter MCI WorldCom could once again be interested in wireless.
• The "back to the future" realization that Nextel Communications Inc. is the only marriageable national carrier not courting or related to a wireline operation, reminiscent of early cellular days.
Or maybe the richness of possibilities was just a bit much to comprehend. Even veteran wireless executives and analysts were struggling to put the week's events into some kind of framework. "The speed and stackup of acquisitions is somewhat mind boggling," said David Poticny, vice president of strategy for Lucent Technologies Inc.'s wireless network group. Then he added, with a bit of trepidation in his voice, "But it does make life exciting."
The excitement, of course, has pushed up stock prices for carriers involved in deal talks, attracted speculators to related stocks and led to mass media reports of potential combinations that are strange indeed.
Shares of Motorola Inc., which supplies both Bell Atlantic and AirTouch, traded as low as $38 3/8 last year, but were up Wednesday to $68 with volume of 3 million shares, higher than the company has experienced lately. A baffled Len Kolsky, vice president of Motorola's global government relations, said conjecture that a merged entity would do more business with Motorola apparently was a factor driving the numbers. The reality is with fewer customers, manufacturers
must be more efficient because handset and infrastructure buyers demand lower prices from vendors.
In the midst of this hoopla, AirTouch must stay focused on the deals that make the most sense for its shareholders. The one that seems least likely is a possible offer from MCI WorldCom. Before it merged last year with WorldCom, MCI had more wireless strategies than Imelda Marcos had shoes. In 1995, MCI suddenly pulled back from a $1 billion planned investment in Nextel, which now has positive cash flow and, because of its corporate focus, would be a better fit for MCI WorldCom. The lack of vision and commitment to wireless at MCI WorldCom contrasts sharply with the track record at AirTouch, which has two very different but solid choices to explore.
E-mail: jlockwood@chilton.net
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