Bell Atlantic and Vodafone Airtouch To Form New U.S. National Wireless Competitor

Cambridge Telcom Report, Sept 27, 1999

Bell Atlantic Corp. (NYSE: BEL) and Vodafone AirTouch Plc (NYSE: VOD; London:) Tuesday announced that they have reached a definitive agreement to create a new wireless business -- with a national footprint, a single brand and a common digital technology -- composed of Bell Atlantic's and Vodafone AirTouch's U.S. wireless assets.

Including GTE's wireless assets, the new business, with a value in excess of $70 billion, will serve approximately 20 million wireless customers and 3.5 million paging customers throughout the United States, making it by far the largest wireless business in the country. The new enterprise will have a footprint covering more than 90% of the U.S. population, and 49 of the top 50 U.S. wireless markets, with 254 million gross POPs.

The new wireless business combines assets from Bell Atlantic Mobile, AirTouch Cellular, PrimeCo Personal Communications and AirTouch Paging. It will be further strengthened by the addition of the cellular and PCS assets of GTE Corp. (NYSE: GTE), which is expected to complete its merger with Bell Atlantic in approximately the first quarter of 2000. Bell Atlantic-GTE will own 55% and Vodafone AirTouch will own 45%. The companies expect to complete the wireless transaction in six to 12 months.

The agreement also provides that Bell Atlantic and Vodafone AirTouch will work together on global business synergies, such as coordinated handset and equipment purchases, global corporate account programs, global roaming agreements, and development of new services, technologies and applications.

Ivan Seidenberg, chairman and chief executive officer of Bell Atlantic said, "Through this combination, we are creating the leading wireless business in the United States. This is a logical fit, naturally uniting our U.S. properties and strong management teams, and enhancing the benefits of Bell Atlantic's merger with GTE.

"The launch of this great new enterprise is superbly timed to capitalize on a historic trend which is altering the future of the telecommunications industry -- the adoption of wireless into the mainstream of American life." Vodafone AirTouch Chief Executive Chris Gent, said, "This agreement represents a major step forward in our U.S. strategy. In a market where penetration levels are relatively low but growth looks set to take off, gaining a nationwide footprint with common technology is of paramount importance in order to remain competitive.

"By participating in the creation of what will be the largest and best wireless business in the U.S., eliminating the cost and complications of alternative routes to national coverage and which should be accretive to proportionate EBITDA from the beginning, we expect to maximise value for our shareholders.

"In addition, the new business will achieve further benefits from close cooperation with our other operations around the world."

GTE Chairman and Chief Executive Officer Charles Lee said, "The addition of Vodafone AirTouch's U.S. domestic wireless assets will greatly accelerate the execution of Bell Atlantic's and GTE's strategy to bring a new, national full-service competitor to the U.S. telecommunications industry. The national coverage area of the new business, with a solid presence on both coasts as well as in the Midwest and the South, significantly increases the area in which Bell Atlantic-GTE will offer both wireline and wireless services. It will increase our opportunity to offer customers around the country a full bundle of communications services. The result will be increased competition for other national players and the creation of an engine for industry-leading growth."

The boards of directors of Bell Atlantic and Vodafone AirTouch have approved the transaction. The board of directors of GTE has voted in consent of the transaction consistent with its rights under GTE's merger of equals agreement with Bell Atlantic. The Bell Atlantic-Vodafone AirTouch wireless agreement and the Bell Atlantic-GTE merger are independent transactions. The completion of one is not contingent upon completion of the other.

Benefits of the Wireless Business

The new wireless business, together with GTE's wireless properties, will have the national scale and scope to realize revenue enhancements, cost savings and capital efficiencies, which Bell Atlantic estimates has a net present value of approximately $7.4 billion. Vodafone AirTouch also believes that revenue enhancements, cost savings and capital efficiencies will be significant. Incremental revenue growth is expected to be driven by a new national brand and enhanced product innovation.

The companies expect the new business to achieve expense savings through reduced roaming costs, lower customer churn and increased economies of scale in transport, billing volumes, handset purchases and advertising. Combining the properties' common CDMA (Code Division-Multiple Access) technology platforms will also yield capital efficiencies, simplified integration and superior network quality.