Bell Atlantic and GTE announce merger talks.....
July 27, 1998
Bell Atlantic, GTE Hold Talks
On a Possible Combination
A Deal, Valued at up to $55 Billion in Stock,
Would Create a Telecommunications Giant
By STEVEN LIPIN and STEPHANIE N. MEHTA
Staff Reporters of THE WALL STREET JOURNAL
Bell Atlantic Corp. and GTE Corp. have been holding high-level talks
about a possible merger that could be valued at between $52.5 billion and
$55 billion, according to people familiar with the matter.
A combination of Bell Atlantic and GTE would be the latest in a series of
megamergers reshaping the telecommunications landscape. It would create
a company with $53 billion in revenue, 62 million local telephone lines and
give Bell Atlantic a springboard for entering coveted long-distance
markets.
While these people say the companies were working toward a possible
announcement this week, the talks could still collapse. Moreover, any
combination must pass muster with regulators, who have been closely
scrutinizing telecommunications combinations and may look closely at the
two companies' cellular assets.
Representatives for GTE, in Stamford, Conn., and Bell Atlantic, in New
York, declined to comment.
Rival to SBC-Ameritech Combination
Thanks to GTE's presence in both local and long-distance services and
Bell Atlantic's virtual monopoly in its core Northeast region, a union would
boast one-third of the nation's local telephone lines with systems in 40
states. In terms of size, a combination of GTE and Bell Atlantic could
overshadow the pending combination of bell rivals SBC Communications
Inc. and Ameritech Corp.
Under the structure being discussed, the two chief executive officers would
share power. Charles Lee, GTE's 58-year-old chairman and CEO, would
initially be chief executive of the combined company. Ivan Seidenberg, Bell
Atlantic's 51-year-old CEO, would initially be president and eventually
become chief executive, say people familiar with the discussions.
Complete terms couldn't be determined. But people familiar with the
matter say the two companies are discussing a stock swap that would
likely value GTE at slightly less than its current stock-market value of more
than $56 billion, or between $54 and $56.50 a share. Any transaction
would be one of the biggest ever in the industry as well as one of the
biggest in U.S. history. Bell Atlantic, the local-phone company with
operations from Maine to Virginia, has a stock-market value of about $71
billion.
Another Telecom Marriage?
Bell Atlantic Corp.
Headquarters: New York
CEO: Ivan G. Seidenberg
1997 Revenue: $30.19 billion
1997 Income: $2.45 billion
Markets served: Local telephone service in region stretching from Maine to
Virginia; Wireless and Internet-access services; International joint ventures and
investments.
* * *
GTE Corp.
Headquarters: Stamford, Conn.
CEO: Charles R. Lee
1997 Revenue: $23.26 billion
1997 Income: $2.79 billion
Markets served: Local telephone services in markets in 28 states; Nationwide
long-distance; Wireless, Internet services; International investments.
Source: the companies
Besides obvious cost savings from combining two companies in the same
industry, in many ways, Bell Atlantic and GTE complement each other.
GTE operates in fast-growth suburban markets; Bell Atlantic's
Northeastern territory has grown slowly but is home to important
corporate and political centers including New York, Boston and
Washington, D.C.
GTE has pushed hard into the data-services arena with its acquisition of
BBN Technologies and its purchase of fibers on Qwest Communications
International Inc.'s national network. Bell Atlantic meanwhile has
announced plans to build its own high-speed data network in its territory.
Foothold in the Texas Market
Meanwhile, Bell Atlantic would find a partner with faster revenue growth
than it is currently enjoying, and in regions of the country that aren't facing
the same competitive pressures as in the Northeast. It would gain a
foothold in such markets as Texas, one of GTE's most important states
and home to SBC.
Of Ma Bell's seven offspring created by the breakup of AT&T, Bell
Atlantic and SBC have emerged as the most ambitious. Earlier this year,
SBC agreed to acquire Southern New England Telecommunications
Corp., which operates smack in the middle of Bell Atlantic territory. Bell
Atlantic itself is the result of an earlier merger of Bell Atlantic and Nynex
Corp.
Challenges to Regulators
Like all big telecommunication deals of late, a Bell Atlantic-GTE merger
could raise eyebrows among regulators. Bell Atlantic, like the rest of the
Bell telephone companies, is prohibited from offering long-distance
services in its home territory until it proves that its local market is open to
rivals. GTE, however, is able to offer long-distance services in all 50 states
through its GTE Communications Corp. unit.
It is unclear whether regulators would seek to block the deal or perhaps
require GTE to shed its long-distance customers in Bell Atlantic territory.
In at least one case, the Justice Department hasn't seen a problem with a
Bell owning an entity that sells long distance: Earlier this year, it approved
SBC's pending purchase of SNET, Connecticut's phone company. SBC
isn't able to offer long distance in its home territory; SNET has that power.
The Bell Atlantic/GTE talks and Sunday's announcement of a new alliance
between AT&T Corp. and British Telecommunications PLC underscore
that phone giants are quickly scrambling to find global partners in what
may be a sort of end-game.
Pressure to Seek Alliances
Sunday, BT and AT&T formally announced a
pact to team up and create an $11 billion
global venture. That could pressure a
Bell-GTE combination to seek its own alliances. Domestically, AT&T is
acquiring cable giant Tele-Communications Inc. for $38 billion and
recently closed on its $11 billion acquisition of local phone carrier Teleport
Communications Group Inc.
While Bell-GTE creates a giant in the U.S., Bell Atlantic in particular has
been eager to enter the global arena on a wide scale. The carrier has been
successful in its international joint ventures, primarily in cellular companies,
but it lacks a one-stop solution for multinational corporations -- largely
because it can't offer long-distance services in its territory.
A partnership with an overseas carrier wouldn't immediately solve Bell
Atlantic's long-distance quandary, but it would vastly broaden the U.S.
carrier's overseas presence in the meantime.
In Big Board trading, shares of Bell Atlantic closed Friday at $45.1875,
up $1.1875, while GTE closed at $57.9375, up $1.50.
--Anita Raghavan contributed to this article.
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