AirTouch Weighs Offers As MCI Walks Away
techweb.com
(01/09/99, 10:34 a.m. ET)
By Reuters
NEW YORK -- AirTouch Communications' U.S. andoverseas wireless coverage has compelled at least three giantphone companies into eyeing AirTouch, resulting in a courtship that has only just begun, analysts said.
With AirTouch's near silence about a merger and media reports largely built around unnamed sources, one of the few clear developments is the company's status as a rare and valuable company with wide swaths of coverage around the world.
AirTouch's businesses serve more than 35 million customers around the world, with more than 16 million based on its ownership share of global ventures, the San Francisco-based company said.
The company confirmed it received a merger proposal from Vodafone Group, Britain's largest wireless company, and Bell Atlantic, the No. 1 U.S. local telephone service provider concentrated in the Northeastern United States.
Vodafone reportedly leads the bidding with an offer of $55 billion, ahead of Bell's offer reported to be worth $48 billion. Both companies have declined to comment.
Meanwhile, during the week, MCI WorldCom briefly considered a combination with AirTouch, but said Friday it is not interested in such a deal. Traders said before MCI's statement, market rumors had MCI WorldCom offering $85 per share for AirTouch, above Bell Atlantic's reported offer and below Vodafone's bid.
Tim O'Neil, wireless services analyst at SoundView Technology Group, said a takeover of AirTouch makes the most sense for the two companies already interested in a deal -- Vodafone and Bell Atlantic.
"What makes sense strategically are the players involved today -- Bell Atlantic and Vodafone. For anyone else, it would be an aggressive stretch to make the strategy work," O'Neil said.
For Bell Atlantic, AirTouch offers a position in the western United States, letting the Baby Bell break out of a relatively confined primary area dwarfed by nationwide providers such as AT&T, Sprint PCS Group, and Nextel Communications, according to analysts.
For MCI WorldCom, he said, "It made no sense for them to buy [wireless coverage of] half of the United States. I am sure they looked at it; they had to look at it."
Internationally, wireless markets are turning more competitive, "with third and fourth competitors coming on in Germany, Italy, and Portugal," O'Neil said. "Prices have been dropped substantially by incumbents trying to gain market share, therefore, we would expect margins to come down."
Also, Vodafone would complement AirTouch's non-domestic operations. Indeed, the two companies are wireless partners in Egypt and Sweden.
AirTouch also owns wireless interests Belgium, Germany, India, Italy, Japan, Poland, Portugal, Romania, South Korea, and Spain, as well as an interest in the Globalstar satellite system.
With margins pressured by new competitors, an expanding "footprint" is a most effective offset, O'Neil said.
"If I am in the United States, I want a nationwide footprint. If I am in Europe, I want a pan-European footprint. I want to have a footprint where my customers go, and the customers I want to attract are the heavy users and heavy users travel," O'Neil said.
"It has been an interesting week, now we will wait and see what plays out with the two players involved. Anything could happen. Telecom Italia could come in and decide they want the AirTouch international pieces, but again, it does not make sense because half of what AirTouch is all about is domestic.
"And the only other domestic carrier that holds the other half of the key is Bell Atlantic," O'Neil said. |
