PacTel Ends Talks for Wireless Cable Firms

In another retreat from its once-grand plans to provide digital television and other advanced communications services, Pacific Telesis Group said Wednesday that it has called off an acquisition of wireless cable licenses and operations that would have served important markets in the San Francisco Bay Area and San Diego.

The San Francisco-based parent of Pacific Bell said it has terminated negotiations to acquire Wireless Holdings Inc. and Videotron Bay Area Inc. for $160 million to $175 million. PacTel denied that it is losing interest in digital TV, but analysts said cancellation of the deal could indicate that SBC Communications Inc.--which is awaiting regulatory approval to complete its $16-billion acquisition of PacTel--may be unenthusiastic about the TV strategy.

Wireless cable is a new technology that makes it possible to beam 120 channels of high-quality digital television signals to rooftop antennas. But it requires a line-of-sight transmission path and is subject to weather interference--and it promises a service that’s largely comparable to what’s already available through conventional cable and satellite services.

Pacific Bell had once planned to build a high-speed fiber-optic communications network throughout the state to offer an array of advanced services, including digital TV. But in January, the company abandoned construction in Los Angeles and parts of Orange County, saying it was too costly, and promised to provide TV by wireless cable instead.

Meanwhile, the company’s Tele-TV programming partnership with Nynex Corp. and Bell Atlantic Corp., which was to acquire and develop the programs for the new channels, has been adrift amid technology strategy shifts and the mergers that have turned allies into competitors.

PacTel said Wednesday that it is still moving ahead with plans to roll out a wireless cable service that will reach 4 million homes in Los Angeles and Orange counties next year. Lee Camp, president and chief executive of Pacific Telesis Enhanced Services, said the cancellation of the acquisitions had to do with problems in the negotiations rather than any strategic shift.

PacTel and the joint owners of Wireless Holdings and Videotron Bay Area--Groupe Videotron of Montreal and Transworld Telecommunications Inc. of Salt Lake City--signed an agreement in November 1995 that would have given PacTel operations and licenses to sell wireless cable in San Diego, San Francisco, Oakland, San Jose and Victorville, and also in markets in Florida, South Carolina and Washington state.

The contract allows any of the companies to terminate those negotiations if a final agreement is not reached by Saturday. Lee said PacTel backed out because it became clear that no deal would be reached unless it made unacceptable concessions.

But Videotron spokeswoman Sylvia Morin said her company--which stands to lose $110 million if the deal isn’t resurrected--is “quite perplexed” by that decision.

“We’re looking at all of our options,” including attempting to compel PacTel to finish the negotiations through binding arbitration, she said.

Some analysts took PacTel’s statements at face value, saying the unraveling of this deal does not signal a lack of commitment to the technology. But others said it shows that PacTel--taking a cue from SBC--is losing its appetite for the wireless cable business.

San Antonio-based SBC has historically been less inclined to make aggressive moves into unproven businesses such as wireless cable, and the market has rewarded the company for its caution, said Robert Wilkes, a communications analyst with the New York investment firm Brown Bros. Harriman.

“It’s possible that the new potential acquiring company could be less enamored with the wireless cable strategy than PacTel was,” he said.