Originally created 09/22/99

Bell Atlantic and Vodafone create giant U.S. wireless company

NEW YORK -- Bell Atlantic Corp. has struck an agreement to acquire the U.S. mobile telephone network of Vodafone AirTouch PLC in a deal that will create the nation's largest wireless phone company.

Bell Atlantic, the country's largest local telephone company, will connect its East Coast network with the West Coast network of Vodafone, Britain's largest wireless company. Their combined 20 million customers will be able to buy cheaper wireless phones, and make calls from almost anywhere in the country without having to pay extra "roaming" charges for out-of-area calls, executives said.

In exchange for Vodafone's $15 billion wireless network, Bell Atlantic will give Vodafone a 45 percent stake in the new company, under the deal announced Tuesday. Bell Atlantic will manage the New York-based venture with assets of $28 billion, and control a majority of seats on the new board.

"This puts together two wireless businesses that are a hand-in-glove fit, both geographically and technically, into the largest wireless company in the United States," said Jeffrey Hines, an analyst with Deutsche Banc Alex Brown. "The new company will have twice the number of subscribers as its nearest competitor."

Bell Atlantic, which is in the process of acquiring GTE Corp., will unseat AT&T Corp. as the No. 1 wireless phone company in the United States.

After the acquisition of GTE is completed early next year, Bell Atlantic will adopt a new name. The wireless phone business will take the same name.

"Once we pick a name, I think we will be able to demonstrate an enormous reach for the new company," said Ivan Seidenberg, the chairman and chief executive of Bell Atlantic.

The companies are expected to sell a stake in the mobile phone business to the public in two to three years.

"Bell Atlantic wants some of the part of the value unleashed, and I think Vodafone wants the opportunity to cash out," said Richard Klugman, an analyst with Donaldson, Lufkin & Jenrette.

Wireless phones, while a trendy convenience for some and an essential business tools for others, are fast becoming a new standard of communication around the globe.

The number of wireless customers in the United States has jumped to 79 million from 16 million in 1993, according to the Cellular Telecommunications Industry Association.

Vodafone entered the U.S. market in January with a $56 billion acquisition of AirTouch Communications Inc. of San Francisco, outbidding Bell Atlantic.

Tuesday's deal would give Bell Atlantic control of AirTouch's business, and Vodafone would get a big stake in a nationwide wireless company.

The two companies, however, did not forge any strategy for international markets, where the wireless industry is expected to see faster growth.

Last week, AT&T Corp. and British Telecommunications PLC formed a global alliance to link their wireless telephone operations with roaming agreements and other unified services. Combined, those two companies will provide wireless services in 17 countries with a combined customer base of 41 million.

The Baby Bells, like Bell Atlantic, have been slow to expand overseas.

"Perhaps they don't want to stretch themselves too thin," said Eric Rasmussen, consultant for TeleChoice Inc., a telecommunications consulting firm. "Bell Atlantic has a lot of local competition coming in, they are trying to get into long-distance, and they want to launch high-speed data services."

The deal between Bell Atlantic and Vodafone awaits antitrust and regulatory review and must be approved by shareholders of Vodafone AirTouch. It already has been approved by the boards of Bell Atlantic and Vodafone AirTouch.

New York-based Bell Atlantic will select four members for the new board, while Vodafone will choose three.

Bell Atlantic's shares rose 93 3/4 cents to $64.56 1/2 a share on the New York Stock Exchange, where Vodafone's U.S. shares jumped $4.62 1/2 to $216.62 1/2 .


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