GTE to Acquire Ameritech Wireless Assets in Midwest for US$3.27 Bln Cash
Anyone care to comment on how this effects Vod-Ati especially in relation to a potential partnership with Bel? My own view is that whether or not there is a partnership Vod-Ati is an attractive partner for any telecom.
Irving, Texas, April 5 (Bloomberg) -- GTE Corp., which is
being acquired by Bell Atlantic Corp., agreed to buy about half
of Ameritech Corp.'s cellular phone business in the Midwest for
$3.27 billion in cash, accelerating a plan to provide wireless
services nationwide.
GTE will add 1.7 million customers in 20 markets, including
St. Louis, Chicago and elsewhere in Illinois, and gain access to
12.9 million potential customers.
The purchase would boost GTE and Bell Atlantic's total
wireless customers to 13 million, the most of any company in the
U.S., and help them compete with coast-to-coast providers like
AT&T Corp. and Sprint PCS. Ameritech is selling the properties to
eliminate overlap with SBC Communications Inc., clearing the way
for antitrust approval of its pending $79.2 billion sale to SBC.
''We're evolving to a handful of major players in the U.S.
(telecommunications industry), and wireless is part of the
competitive weaponry,'' said Robert Wilkes, an analyst at Brown
Brothers Harriman & Co.
Investment company Georgetown Partners will buy a 7 percent
stake in the properties GTE is acquiring from Ameritech.
GTE is paying about $253 per potential customer for the
Ameritech businesses. That's just below the average of about $268
paid in purchases announced last year, said Jeffrey Hines, a
wireless analyst at BT Alex. Brown Inc.
The price is about 10 to 11 times earnings before interest,
taxes, depreciation and amortization, at the low end of last
year's range of 10 to 14 times, Hines said.
Nationwide Push
Irving, Texas-based GTE fell 9/16 to 60 3/16, while New York-
based Bell Atlantic rose 1/8 to 51 7/8. Chicago-based Ameritech
rose 2 3/8 to 62 5/8, and San Antonio-based SBC rose 1 1/16 to 50
13/16.
GTE said the purchase would be ''slightly dilutive'' to
earnings per share in the first year, though the affects on the
combined Bell Atlantic-GTE would be ''insignificant.''
The Ameritech businesses are expected to have sales of $800
million to $850 million next year and earnings of $90 million to
$110 million, GTE Chief Financial Officer Dan O'Brien said. About
1,700 Ameritech employees will move to GTE in the purchase.
GTE said it's financing about 75 percent of the purchase
through debt.
U.S. wireless companies have been pushing to accelerate
plans to expand nationwide over the past year, after AT&T last
May unveiled its Digital One Rate plan, which charges a single
rate for calls anywhere in the U.S.
The companies are building new networks and buying existing
systems from smaller rivals to help lower the fees they pay
competitors when customers travel. Bell Atlantic and GTE both
offer nationwide plans to compete with AT&T.
AT&T, the largest U.S. phone company, is also expanding.
Last October, the company agreed to buy Vanguard Cellular Systems
Inc. for $1.5 billion and in January said it will spend about $2
billion in 1999 to beef up its wireless networks and build
systems in new markets.
''Telecom is going national, both fixed and wireless,'' BT
Alex. Brown's Hines said. ''It's imperative for the regional
players to expand to a national platform.''
Bell Atlantic
The GTE-Ameritech agreement comes less than three months
after Bell Atlantic lost a bidding war to Britain's Vodafone
Group Plc to buy San Francisco-based AirTouch Communications Inc.
The purchase would have given Bell Atlantic a nationwide U.S.
network, with operations in almost all of the top 100 cities.
Bell Atlantic Chief Executive Ivan Seidenberg in February
said his company would look for other ways to expand coast-to-
coast.
GTE, which has cellular networks in 17 states, said the
purchase would boost its wireless customers by about a third.
It also gives the company networks in about 60 percent of
the top 50 U.S. metropolitan markets, said Mark Feighner,
president of GTE Wireless.
Chicago is the third-largest wireless market in the U.S.,
and the Ameritech Chicago unit is the country's oldest cellular
business.
Savings
Feighner expects savings from combining the GTE and
Ameritech networks, including cutting costs of transmitting calls
and eliminating duplicate functions, such as billing and customer
service. He doesn't expect any technical problems with the
combination, since both companies use the same digital standard
for their networks and equipment made by Lucent Technologies Inc.
Closely held Georgetown Partners, of Bethesda, Maryland,
will pay about $60 million for its 7 percent equity stake in the
Ameritech properties and assume responsibility for its share of
the debt, said Chester Davenport, Georgetown's chairman.
Davenport will be chairman of the separate subsidiary GTE plans
to set up to run the Ameritech properties.
The sale includes all of the markets the U.S. Justice
Department said SBC and Ameritech must shed and one market that
Ameritech wasn't required to sell, said Ameritech spokesman
George Stenitzer. The companies agreed to sell the additional
property in Vermillion County, Illinois, because it's operated
together with one of the other properties, he said.
Ameritech's sale to SBC is still awaiting approval from the
U.S. Federal Communications Commission.
The boards of GTE, Ameritech and Georgetown Partners have
approved the sale. Bell Atlantic has agreed to support the
transaction.
Ameritech and SBC were advised by Salomon Smith Barney Inc.
on the sale.
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