PrimeCo, Has a problem>
From the April 19, 1999 issue of Wireless Week
PrimeCo Breakup Papers Filed
By Bruce Felps
DALLAS--The clock's ticking on the fate of personal communications services carrier PrimeCo Personal Communications LP. Last week Bell Atlantic Corp. and
GTE Corp. filed a joint proxy statement with the Securities and Exchange Commission indicating they intend to dissolve the PrimeCo partnership immediately
following the completed merger between AirTouch Communications Inc. and Vodafone Group plc.
PrimeCo's dissolution stems from overlapping markets and possible infringements on non-compete clauses in the original partnership agreement between AirTouch
and Bell Atlantic.
The charter for PrimeCo, which included partners Bell Atlantic, AirTouch, U S West and Nynex Corp. when written in 1994, gives both surviving parent companies
the right to end the partnership in 2001. Since the original agreement, U S West sold its stake in PrimeCo to AirTouch, and Nynex was acquired by Bell Atlantic.
According to Brian Wood, spokesman for Bell Atlantic Wireless Group, which oversees the company's wireless interests, Bell Atlantic planned to end its partnership
in PrimeCo in two years regardless of AirTouch's merger. "We will break up [the partnership] one way or the other."
Wood said Bell Atlantic believes PrimeCo is "mature enough to stand on its own. We accomplished the goal of the [original] agreement, which was to establish a
thriving PCS business."
What will happen to PrimeCo remains unknown. AirTouch and Bell Atlantic could take control of different PrimeCo markets. However, separate control hinges on
license or spectrum issues after the two mergers. The partners could spin off PrimeCo, issue an initial public offering of stock and become shareholders in the resulting
company. One of Bell Atlantic's options is to divide PrimeCo's personal communications services properties with AirTouch following procedures contained in the
PrimeCo partnership agreement. Jonathan Marshall, spokesman for AirTouch, said the company is willing to try that option. "We'll work to divvy up the markets. If
we can't agree, it goes to arbitration. I can't say which markets AirTouch would want. That would be the subject of a lot of analysis."
However, it is unlikely PrimeCo will be shut down, according to industry analysts. "I can't imagine that PrimeCo would cease to [exist], because they have more than
1 million subscribers," said Kent Olson, a consultant with The Strategis Group.
Dave Berndt, associate director of the Yankee Group's wireless program, agreed. "PrimeCo is well known and has built strong brand recognition. There's value in
keeping the PrimeCo name."
If the partners become shareholders, that could draw the attention of government agencies, Berndt said. "If they issue an IPO, the Justice Department and the FCC
will tell them they have to make enough stock public so neither company has a controlling interest."
Berndt said dividing PrimeCo's markets among the parent companies would have a mixed effect on the industry. "On one hand, there would be one fewer
competitors in the marketplace. But if they divvy up the properties, it could make each company stronger. Potentially, it could bring Bell Atlantic into a market like
Dallas, or AirTouch could get Chicago. That would increase competition."
PrimeCo, meanwhile, is taking a casual approach to last week's filing. "It's business as usual," said Catarina Wylie, PrimeCo's spokeswoman. "We've read the proxy
statement and know what they're saying. At this point, we don't know anything more than that. It's in the hands of the parents."
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