NEW YORK and LONDON - Bell Atlantic Corp.
(NYSE:BEL) and Vodafone AirTouch Plc (LSE:VOD;
NYSE:VOD) today announced that they have reached a
definitive agreement to create a new wireless business - with a
national footprint, a single brand and a common digital
technology - composed of Bell Atlantic's and Vodafone
AirTouch's U.S. wireless assets.
Including GTE's wireless assets, the new business, with a value
in excess of $70 billion, will serve approximately 20 million
wireless customers and 3.5 million paging customers
throughout the United States, making it by far the largest
wireless business in the country. The new enterprise will have a
footprint covering more than 90% of the U.S. population, and
49 of the top 50 U.S. wireless markets, with 254 million gross
POPs.
The new wireless business combines assets from Bell Atlantic
Mobile, AirTouch Cellular, PrimeCo Personal Communications
and AirTouch Paging. It will be further strengthened by the
addition of the cellular and PCS assets of GTE Corp.
(NYSE:GTE), which is expected to complete its merger with
Bell Atlantic in approximately the first quarter of 2000. Bell
Atlantic-GTE will own 55% and Vodafone AirTouch will own
45%. The companies expect to complete the wireless
transaction in six to 12 months.
The agreement also provides that Bell Atlantic and Vodafone
AirTouch will work together on global business synergies, such
as coordinated handset and equipment purchases, global
corporate account programs, global roaming agreements, and
development of new services, technologies and applications.
Ivan Seidenberg, chairman and chief executive officer of Bell
Atlantic said, "Through this combination, we are creating the
leading wireless business in the United States. This is a logical
fit, naturally uniting our U.S. properties and strong management
teams, and enhancing the benefits of Bell Atlantic's merger with
GTE.
"The launch of this great new enterprise is superbly timed to
capitalize on a historic trend which is altering the future of the
telecommunications industry - the adoption of wireless into the
mainstream of American life."
Vodafone AirTouch Chief Executive Chris Gent, said, "This
agreement represents a major step forward in our U.S.
strategy. In a market where penetration levels are relatively low
but growth looks set to take off, gaining a nationwide footprint
with common technology is of paramount importance in order
to remain competitive.
"By participating in the creation of what will be the largest and
best wireless business in the U.S., eliminating the cost and
complications of alternative routes to national coverage and
which should be accretive to proportionate EBITDA from the
beginning, we expect to maximise value for our shareholders.
"In addition, the new business will achieve further benefits from
close cooperation with our other operations around the world."
GTE Chairman and Chief Executive Officer Charles Lee said,
"The addition of Vodafone AirTouch's U.S. domestic wireless
assets will greatly accelerate the execution of Bell Atlantic's and
GTE's strategy to bring a new, national full-service competitor
to the U.S. telecommunications industry. The national coverage
area of the new business, with a solid presence on both coasts
as well as in the Midwest and the South, significantly increases
the area in which Bell Atlantic-GTE will offer both wireline and
wireless services. It will increase our opportunity to offer
customers around the country a full bundle of communications
services. The result will be increased competition for other
national players and the creation of an engine for
industry-leading growth."
The boards of directors of Bell Atlantic and Vodafone
AirTouch have approved the transaction. The board of
directors of GTE has voted in consent of the transaction
consistent with its rights under GTE's merger of equals
agreement with Bell Atlantic. The Bell Atlantic-Vodafone
AirTouch wireless agreement and the Bell Atlantic-GTE
merger are independent transactions. The completion of one is
not contingent upon completion of the other.
Benefits of the Wireless Business
The new wireless business, together with GTE's wireless
properties, will have the national scale and scope to realize
revenue enhancements, cost savings and capital efficiencies,
which Bell Atlantic estimates has a net present value of
approximately $7.4 billion. Vodafone AirTouch also believes
that revenue enhancements, cost savings and capital efficiencies
will be significant. Incremental revenue growth is expected to
be driven by a new national brand and enhanced product
innovation.
The companies expect the new business to achieve expense
savings through reduced roaming costs, lower customer churn
and increased economies of scale in transport, billing volumes,
handset purchases and advertising. Combining the properties'
common CDMA (Code Division-Multiple Access) technology
platforms will also yield capital efficiencies, simplified
integration and superior network quality.
The new wireless enterprise will offer products and services on
a national basis under a name consistent with the overall
re-branding of the combined Bell Atlantic-GTE. It will also
offer enhanced value for both consumers and businesses,
including flat-rate coast-to-coast pricing plans and the
accelerated rollout of next-generation, advanced wireless data
services.
Headquarters, Board and Management
The Bell Atlantic-Vodafone AirTouch wireless enterprise will
be managed by Bell Atlantic. The new wireless enterprise's
board will have seven members, with four designated by Bell
Atlantic and three by Vodafone AirTouch. Mr. Seidenberg and
Mr. Gent will be board members. Once the Bell Atlantic-GTE
merger closes, Mr. Lee will also become one of the seven
board members.
Bell Atlantic will nominate the chief executive officer of the
wireless enterprise, and Vodafone AirTouch will nominate one
other significant officer, initially the chief financial officer. Other
leaders of the new business will be chosen from among the
three companies. Headquarters will be located in the New
York metropolitan area.
Approval Process
The transaction will require expiration of the applicable
Hart-Scott-Rodino waiting period and approval by various
regulatory authorities. The companies will explore various
options to address overlapping properties, estimated to amount
to 3 million wireless customers and approximately
49 million POPs after the addition of the GTE properties.
The transaction will also require the approval of the
shareholders of Vodafone AirTouch. It will also be subject to
the receipt of an exemptive order from the Securities and
Exchange Commission or other satisfactory resolution
regarding the application of the 1940 Investment Company Act
to Vodafone AirTouch and AirTouch Communications, Inc.
Finance and Accounting
Bell Atlantic will consolidate the revenues and expenses of the
new wireless business into its financial results, and the
transaction will be accounted for as a purchase. Vodafone
AirTouch will use equity accounting for its interest, recognizing
a proportionate share of the wireless enterprise's results based
on its ownership interest.
Vodafone AirTouch and Bell Atlantic have agreed to a
dividend policy for the first five years of the combined wireless
business such that 70% of adjusted net income (after payment
of taxes but before deduction of goodwill amortization), will be
distributed as dividends provided that certain credit ratios are
maintained. After the five-year period, the board will evaluate
future dividend policies.
The new business will initially assume or incur up to $10 billion
in existing and new debt. Vodafone AirTouch's recourse debt
is expected to decline by $4.5 billion.
Vodafone AirTouch can elect to sell shares through an IPO in
a company formed to hold ownership interests in the wireless
business at any time after three years from the closing of the
transaction. In addition, if Bell Atlantic were to initiate an IPO
(which it could do any time after the close), Vodafone
AirTouch will be entitled to pro rata participation.
Vodafone AirTouch can also choose to put up to $20 billion
worth of its interest to Bell Atlantic or the wireless business
between three to seven years from the closing of the
transaction.
Merrill Lynch & Co., Inc. and Warburg Dillon Read acted as
financial advisors and provided fairness opinions to Bell
Atlantic. Goldman, Sachs & Co. acted as financial advisor and
provided a fairness opinion to Vodafone AirTouch. Chase
Securities and Salomon Smith Barney acted as financial
advisors to GTE.
More details on the assets being contributed by the companies
are included in the attached table.
Bell Atlantic
Bell Atlantic is at the forefront of the new communications and
information industry. With more than 43 million telephone
access lines and 10 million wireless customers world-wide, Bell
Atlantic companies are premier providers of advanced wireline
voice and data services, market leader in wireless services, and
the world's largest publishers of directory information. Bell
Atlantic companies are also among the world's largest investors
in high-growth global communications markets, with operations
and investments in 23 countries.
Vodafone AirTouch
Vodafone AirTouch, based in the United Kingdom, is the
world's largest mobile telecommunications company. It has
mobile operations in 23 countries on five continents, with more
than 28 million proportionate customers. Its ventures cover a
population of nearly 900 million people. In the United States,
Vodafone AirTouch serves 9 million proportionate cellular and
PCS customers in 24 states and 22 of the top 30 U.S.
markets, including Atlanta, Chicago, Dallas, Detroit, Houston,
Los Angeles, Phoenix, San Diego, San Francisco and Seattle.
GTE
With 1998 revenues of more than $25 billion, GTE is a leading
telecommunications provider with one of the industry's
broadest arrays of products and services. In the United States,
GTE provides local service in 28 states and wireless service in
17 states, as well as nationwide long-distance, directory, and
internetworking services ranging from dial-up Internet access
for residential and small-business consumers to Web-based
applications for Fortune 500 companies. Outside of the
United States, the company serves customers on five
continents.
Visit www.bellatlantic.com, www.vodafone-airtouch-plc.com
and www.gte.com for information about Bell Atlantic,
Vodafone AirTouch and GTE. |
