Bell Atlantic Will Buy Phone Firm : Merger: The deal involves a $1.65-billion stock swap with cellular phone company Metro Mobile CTS.
Bell Atlantic Corp. said Tuesday that it would acquire Metro Mobile CTS Inc. in a $1.65-billion stock swap and that the regional phone company will expand its cellular network to New England, the Southwest and the Carolinas.
Metro Mobile shareholders will get $1.65 billion in Bell Atlantic stock, and Bell Atlantic will assume $800 million of Metro Mobile’s debt.
The deal, which the parties hope to conclude in six months, would add to a series of cellular phone mergers taking place as the industry moves toward “seamless” coverage of the country with wireless networks.
The combinations will make calling and billing more convenient for customers and will streamline administration and marketing for the cellular companies, industry analysts said.
Philadelphia-based Bell Atlantic, one of the seven Baby Bell companies, is now positioned “to benefit from whichever direction technology and a rapidly changing market pulls us,” said Raymond W. Smith, chairman and chief executive.
“It’s a deal that puts Bell Atlantic square in the top tier of wireless carriers in the country,” he said.
As of July 1, Bell Atlantic Mobile Systems had 283,000 subscribers in Pennsylvania, New Jersey, Delaware, West Virginia, Virginia, Maryland and Washington.
New York-based Metro Mobile had 175,000 subscribers at that time, in Connecticut, Rhode Island, Massachusetts, North Carolina, South Carolina, Arizona, New Mexico and El Paso. It is the nation’s second-largest independent cellular operator.
The industry measures size by “populations,” or “pops,” the number of people a licensed area contains. Bell Atlantic has 22.1 million pops and will gain 11.5 million from Metro Mobile.
“We will have a market in cellular that compares in size to the one that is served by our (phone) line network,” Smith said.
The merger will offer economies of scale and more efficient operations, he said, as well as marketing advantages. A sales clerk, for instance, could use a single cellular company while driving from Boston to Columbia, S.C.
“In some ways it’s going to compete, and in some ways it’s going to complement land-line networks,” Smith said. “But however the market develops, Bell Atlantic now has a strategic advantage.”
The cost of the merger was expected to drag down earnings next year 10% to 12%, Smith said.
Bell Atlantic stock fell $1.625 a share to $46 by the 4 p.m. close of trading on the New York Stock Exchange. Metro Mobile’s Class A stock rose $1.875 to $21 on the American Stock Exchange, while its more widely traded Class B stock rose $2.375 to $21.125.
The cellular phone business, now 8 years old, requires tremendous capital investment, said analyst Herschel Shosteck of Herschel Shosteck Associates Ltd. in Silver Spring, Md. Most companies are saddled with heavy debt, he said.
“Metro Mobile has an asset but doesn’t have the money to run it. So it’s a good move for them to sell,” Shosteck said.
“Conversely, Bell Atlantic has the money and they have the long-term strategic orientation, so it makes sense for them to be buying,” he said.
Smith said the merger “will consolidate our position as the leading cellular company on the East Coast.” He said he foresees “more aggressive development and higher prospective penetration rates.”
Metro Mobile’s chairman and chief executive, George L. Lindemann, said his company “will become partners with a dynamic communications company on the cutting edge of new technologies.”
Last year, GTE Corp. and Contel Corp., both major cellular operators, merged in a $6.24-billion deal. Earlier this year, Comcast Corp. bought Metromedia’s cellular business for $1.1 billion.
Mergers in the industry are “happening constantly,” Shosteck said. “It’s like any rapidly growing new business--you merge or you die. That will continue until there are just 10 or 12 major carriers.”
Bell Atlantic is the parent company of New Jersey Bell, Bell of Pennsylvania, Diamond State Telephone in Delaware and the Chesapeake and Potomac Telephone companies.
Largest Mobile Phone Companies Bell Atlantic Corp.’s $1.65-billion acquisition of Metro Mobile CTS Inc. will make Bell Atlantic the fourth-largest mobile phone company in the nation. The following lists the top 10 companies and the potential cellular phone customers they serve.
McCaw Cellular: 72.2 million
GTE/Contel: 52.9 million
BellSouth: 34.4 million
Bell Atlantic*: 33.6 million
Pacific Telesis: 31.3 million
Southwestern Bell: 30.8 million
Ameritech: 21.1 million
NYNEX: 18.6 million
Centel: 17.5 million
US West: 17.1 million
Includes planned acquisition of Metro Mobile CTS, with 11.5 million potential customers.
Source: Bell Atlantic Corp.
