Giant Bell Atlantic May Be in Talks to Acquire AirTouch
Phone giant Bell Atlantic Corp. is reportedly in talks to buy San Francisco-based AirTouch Communications Inc. in a deal that could trigger a wave of similar mergers in the crowded but fast-growing wireless communications market.
Under the potential deal, Bell Atlantic would buy AirTouch for $45 billion in stock, according to CNBC, which reported the talks Thursday, citing officials close to the negotiations. The report said a tentative merger could be announced as early as next week.
A spokesman at Bell Atlantic declined to comment. AirTouch officials were not available.
AirTouch, one of the nation’s largest wireless carriers, already has close ties to Bell Atlantic’s wireless unit through a pair of joint ventures between the two firms. If consummated, the marriage of the companies would rank as one of the nation’s largest telecom deals and would further accelerate the already frenzied pace of consolidation in telecommunications.
Bell Atlantic, having already swallowed neighboring Baby Bell company Nynex, is now pushing regulators to approve its tentative merger with GTE Corp., California’s second-largest local phone operator and the largest non-Bell company in the local phone business.
Adding AirTouch to that mix would create a powerful national wireless operator that could instantly rival AT&T; Wireless and Sprint PCS. The merger also would further pressure the nation’s remaining small and regional carriers--such as Pacific Bell Wireless--to strike deals of their own, analysts said.
In New York Stock Exchange trading Thursday, Bell Atlantic shares fell $3.50 to close at $54, while AirTouch’s shares rose $3.06 to close at $72.44--giving AirTouch a market value of about $41.4 billion. The $45-billion offer from Bell Atlantic would represent a more than 13% premium over Wednesday’s pre-rumor closing price.
Analysts on Thursday called the rumored merger a natural fit and a deal well worth pursuing for Bell Atlantic even if it muddies the waters with regulators reviewing its pending GTE purchase. If Bell Atlantic merges with GTE, it will absorb another large wireless unit--GTE Wireless--a longtime rival to AirTouch in California. Regulators may view the absorption of both AirTouch and GTE Wireless by Bell Atlantic as anti-competitive.
“It is very sticky and a very tangled web [for regulators], but it makes a lot of sense for Bell Atlantic,” said Jeffrey Kagan, president of Kagan Telecom Associates, a telecommunications research firm near Atlanta. “It gives them a huge footprint in some of the most lucrative markets.”
Bell Atlantic’s wireless arm has 5.9 million customers and already covers a vast region along the East Coast, where it is aggressively fending off incursions from AT&T; Wireless and Sprint PCS, among others. Bell Atlantic Mobile also owns a subsidiary with cellular operations in Arizona, New Mexico and Texas.
AirTouch, known as PacTel Cellular before Pacific Telesis spun off the unit, has been growing rapidly and lays claim to about 16 million wireless customers through its own operations in the U.S. and in 12 other nations, and as many as 35 million including the company’s various overseas ventures and other operations in which AirTouch is an owner.
Those figures include its purchase of the U.S. wireless operations of MediaOne Group for $5.9 billion, an acquisition that closed in April.
AirTouch also is paired with rival AT&T; in a joint venture that sells service in San Francisco and parts of Texas, Kansas and Missouri.
Both Bell Atlantic and AirTouch hold 50% interests in PrimeCo Personal Communications, which sells wireless service in several key U.S. markets and has more than 700,000 customers. The two companies also have large paging operations.
Merging two companies with such extensive wireless operations will give regulators plenty to review, and it is likely that no Bell Atlantic-AirTouch deal would gain government approval without the sale of operations in markets where their services overlap.
But analysts say the wireless industry is in dire need of consolidation and that the Bell Atlantic-AirTouch merger--if it materializes--would be the first of many more in 1999.
“The whole wireless market is excessively fragmented. . . . There are about three times too many companies,” said Bill Davidson, chairman of MESA Research in Redondo Beach. “This is an industry that has peaked and is about to enter the shakeout phase.”
