Bell Atlantic Confirms Talks to Buy AirTouch

Bell Atlantic Corp. and San Francisco-based AirTouch Communications Inc. confirmed Sunday that they are holding merger talks, but the two companies kept mum on the rumored price tag of $45 billion in stock and refused to say when a deal might be announced.

New York-based Bell Atlantic is the nation’s largest local phone company, with substantial wireless operations along the East Coast, while AirTouch is a strong regional wireless provider with a vast base of customers in the western U.S., including Southern California, and overseas.

If they were to merge, the Bell Atlantic and AirTouch wireless networks could become a formidable rival to national competitors AT&T; Corp. and Sprint PCS.

“Discussions are taking place with AirTouch relating to a possible business combination between the two companies,” Bell Atlantic said in a statement late Sunday. AirTouch also confirmed the talks, but both companies stressed that there was no timetable for the negotiations and no assurance that a deal would be struck.

The AirTouch board of directors has not approved a deal, and “significant issues still remain unresolved,” the company said late Sunday.

Speculation about a potential marriage between the companies has been rampant since last week, and analysts believe a deal could be announced as early as today. Several reports emerged over the weekend that the potential deal was under review by both companies’ boards, as well as by executives of GTE Corp., which in July agreed to merge with Bell Atlantic in a $55-billion stock deal.

That pact is still under review by federal and state regulators, and a Bell Atlantic-AirTouch combination would also draw the attention of antitrust officials. GTE has substantial wireless operations and competes vigorously against AirTouch in Los Angeles and other key markets.

Because of the pending GTE acquisition, Bell Atlantic would probably need approval from GTE executives before acquiring AirTouch.

The potential merger calls for Bell Atlantic to purchase AirTouch for a reported $45 billion in stock, which would rank it among the largest transactions in U.S. history. Indeed, news of the possible buyout sent AirTouch shares higher last week, giving the company a market value of about $41.4 billion--and AirTouch shareholders may well press for a higher price.

Analysts say the merger is a natural for both companies, which already have close ties through two joint ventures in the wireless business. Still, observers cautioned that regulators are likely to take a close look at the wireless-service juggernaut that could be produced by the acquisition--especially if GTE’s wireless holdings are added to the equation.

AirTouch has more than 16 million wireless customers through its own operations and up to 35 million including the company’s various international ventures and other operations in which AirTouch is a part-owner.

Bell Atlantic, for its part, has nearly 6 million wireless customers and a solid market position in its East Coast territory. Together, Bell Atlantic and AirTouch also own PrimeCo Personal Communications, a wireless venture with about 700,000 customers.

All the companies involved--Bell Atlantic, AirTouch, PrimeCo and GTE--have built their U.S. wireless networks using the same digital technology, which would make combining the various networks fairly easy.

“This deal makes a lot of sense if they can artfully work around the antitrust issues,” said Jeffrey Kagan, president of Kagan Telecom Associates, a research firm based near Atlanta.

Wireless operations have become increasingly important to phone companies, especially since local and long-distance providers have yet to push deeply into each other’s markets on the wired side of the business. Wireless, furthermore, is growing rapidly.

But these days, having a national--not just regional--presence has become key to attracting and holding on to the big spenders of wireless: the traveling business user.

Kagan and other analysts believe that other regional carriers will ultimately have to find partners to secure a broader base of customers, which is likely to provoke more mergers in 1999.

“Wireless is a key trend for the future,” Kagan said. “This is what you have to do if you’re a telecom firm. Mergers and acquisitions and expanding your footprint is as important as sales and marketing these days.”