Merger of Baby Bells Clears Hurdle

The Justice Department approved the merger of Bell Atlantic and Nynex on Thursday, concluding that the combination of the two Baby Bells along the Eastern seaboard does not violate antitrust laws.

It would be the second-biggest merger in U.S. history, creating a telephone colossus controlling 38 million phone lines from Maine to Virginia.

The deal still must be approved by the Federal Communications Commission. But federal antitrust clearance was the biggest stumbling block for the $23-billion deal, announced in April 1996.

The Justice Department announced its decision in a one-paragraph statement that said its investigation of the proposed deal had been closed “after thorough investigation and analysis.”

The Justice Department’s action comes after a yearlong investigation into whether the merger would diminish future competition in the regions served by Bell Atlantic and Nynex.

Consumer advocates had opposed the merger, arguing that Bell Atlantic and Nynex would have been each other’s biggest competitors if they invaded each other’s local phone territories.

“There are grave dangers that consumers will see their phone bills rise if this combination cannot be constrained by careful public oversight,” said Gene Kimmelman, co-director of the Washington office of Consumer’s Union, a private organization that had asked the Justice Department to block the deal.

But the companies say consumers should expect to see little difference in local calling rates after the merger, and could see improved service as Bell Atlantic upgrades Nynex’s less-advanced operations.

The merger “will promote customer choice, innovation and economic growth in the communities we serve,” said Nynex Chairman Ivan Seidenberg.

Shares of Bell Atlantic fell $1.125 to close at $58.625; Nynex shares dropped 12.5 cents to close at $44.375. Both trade on the New York Stock Exchange. The combined company will be called Bell Atlantic.

The deal should go down as the second biggest in U.S. history behind RJR Nabisco’s $25-billion merger with Kohlberg Kravis Roberts & Co. in 1989.

The union would be the second merger of Baby Bells after SBC Communications took over Pacific Telesis Group for $16.7 billion earlier this year.