AirTouch, and Its Boss, Are Big Winners in Merger
Less than five years ago as the top executive at Pacific Telesis, Sam Ginn orchestrated the spinoff of the company’s fledgling wireless operations. He then stunned observers by abandoning his PacTel job to run the newly independent firm.
The move became official on April Fool’s Day in 1994. But Ginn was no fool. The switch turned out spectacularly: Ginn’s start-up, San Francisco-based AirTouch Communications, quickly became the largest wireless phone company in the world, with more than 16 million customers in the U.S. and abroad.
Along the way, AirTouch’s stock price soared. At the time of the spinoff, the shares traded at $21. On Friday, AirTouch closed at $83.38, up $4.56 on the New York Stock Exchange. After the close of the market Friday, AirTouch announced that it had agreed to be bought by Britain’s Vodafone Group in a deal worth an estimated $62 billion.
The deal capped a weeks-long bidding war that included a buyout offer from New York-based local phone company Bell Atlantic.
AirTouch shareholders--including Ginn--are expected to get about $97 per share in cash and Vodafone stock under the deal.
Together, the two companies serve more than 27 million paging and wireless phone customers in 23 countries. As part of the merger, Ginn will become a non-executive chairman of the merged company.
In an interview with The Times, Ginn offered insight into the decision to go with Vodafone and the outlook for the wireless industry:
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Question: How did it come down to Vodafone?
Answer: The board was confronted with three options. The first one, of course, was remaining independent. The other two options were very, very different.
Bell Atlantic solved a very important strategic problem that our company faces, and that is a nationwide footprint.
Q: And Vodafone?
A: [With Vodafone] you can move to the next level in wireless: You can create the premium wireless company in the world. There’s a lot of growth in existing markets and, as countries decide to open up competition in Asia and Africa and Latin America, this company has the resources, the talent, the engineering capability and the will to go in and win. So the decision was driven by two things: price and the strategy beyond the closing, over the long term.
Q: What about the need for a national network in the U.S.?
A: We’re still confronted with the U.S. footprint problem. We’ve got to fix it; the question is how. Hopefully, we can cooperate with Bell Atlantic, even though we couldn’t get together on a merger. Have reciprocal roaming. . . . Perhaps even make sure you have common numbers to dial for customer care.
Q: What post-merger changes do you see in the U.S. operations?
A: The United States and Asia operations are going to be handled out of San Francisco. We’re also going to have an R&D; facility here. There will be some corporate functions that will move, but with the growth of our business, we really don’t see a lot of job loss.
Q: How much will you make in this deal? Have you calculated that yet?
A: This will sound odd to you, but I have not. Basically, when you save your options for six or seven years, and the value of the company moves from $10 billion to $56 billion, it’s going to be a big number. [Ginn’s total is estimated at about $227.5 million, including options and stock tallied through 1997.]
Q: How well will employee-shareholders do in the deal?
A: We’ve created a wonderful opportunity for our employees. . . . Our employees have made gains of over $2 billion in stock options since we were formed. All 13,000 of our employees are owners, and we made them owners from Day One. I think it’s one of the critical elements to our success.
Q: What will happen to other regional U.S. carriers?
A: They’d better check their hole cards, because this industry’s moving very fast. They can survive as regional companies maybe for a period of time. But my own view of that is that it’s limited.
