Bell Atlantic and Vodafone to Merge Mobile Networks : Telecom: Deal would create country’s largest wireless company, with almost twice as many customers as AT&T;.
Bell Atlantic Corp. and Vodafone AirTouch on Tuesday agreed to combine their U.S. wireless operations to form the nation’s largest mobile phone company--at 20 million customers, nearly double the size of former leader AT&T; Corp.
Bell Atlantic, the country’s largest local phone company, would connect its East Coast network with the West Coast network of Vodafone, Britain’s largest wireless company. Executives said their customers will be able to buy cheaper wireless phones and make calls from almost anywhere in the country without having to pay extra “roaming” charges for out-of-area calls.
In exchange for Vodafone’s $15-billion wireless network, Bell Atlantic would give Vodafone a 45% stake in the new company, under the deal announced Tuesday. Bell Atlantic would manage the New York-based venture, which has assets of $28 billion, and control a majority of seats on the new board.
“This puts together two wireless businesses that are a hand-in-glove fit, both geographically and technically, into the largest wireless company in the United States,” said Jeffrey Hines, an analyst with Deutsche Banc Alex. Brown. “The new company will have twice the number of subscribers as its nearest competitor.”
Bell Atlantic, which is in the process of acquiring GTE Corp., will unseat AT&T; as the No. 1 wireless phone company in the United States.
The merger would probably trigger shake-ups in San Francisco and San Diego, two large mobile phone markets served by Vodafone AirTouch and the wireless unit of GTE.
Customers in San Francisco could see the most change because the merger would probably force the breakup of the 50-50 joint venture there between Vodafone AirTouch and AT&T; Wireless, which operates under the CellularOne name.
The combined company is expected to keep the GTE network in San Francisco and sell off its half-ownership of CellularOne. That could pave the way for AT&T; to offer more aggressive pricing plans, including its Digital One Rate plan, which is not currently available in San Francisco.
In San Diego, Vodafone AirTouch would probably keep its own network and sell off the GTE property, injecting a new player in that market.
Vodafone AirTouch employs more than 4,500 people statewide, including several hundred in administrative and other support positions that could be eliminated or moved to the new wireless headquarters in New York. California would lose an unspecified number of jobs in the merger process.
San Francisco would remain the headquarters for other Vodafone AirTouch operations, including its Globalstar, global technology and Asia-Pacific administrative functions, which employ about 200 people, the company said.
After the acquisition of GTE is completed early next year, Bell Atlantic will adopt a new name. The wireless phone business would take the same name.
“Once we pick a name, I think we will be able to demonstrate an enormous reach for the new company,” said Ivan Seidenberg, chairman and chief executive of Bell Atlantic.
The companies are expected to sell a stake in the mobile phone business to the public in two to three years.
“Bell Atlantic wants some of the value unleashed, and I think Vodafone wants the opportunity to cash out,” said Richard Klugman, an analyst with Donaldson, Lufkin & Jenrette.
The two companies did not forge any strategy for international markets, where the wireless industry is expected to see faster growth.
Last week, AT&T; and British Telecommunications formed a global alliance to link their wireless operations with roaming agreements and other unified services. Combined, those two companies will provide wireless services in 17 countries with a combined customer base of 41 million.
Bell Atlantic shares rose 94 cents to close at $64.56 on the New York Stock Exchange, where Vodafone’s American depositary receipts jumped $4.63 to close at $216.63.
