Pacific Telesis gives birth to AirTouch: a new generation wireless company

Mobile Phone News, April 11, 1994

What do baby elephants and AirTouch have in common? A two-year gestation period. Last week, the spin-off of PacTel Corp., now AirTouch, from its parent company Pacific Telesis became final, concluding the two-year endeavor to establish one of the largest independent wireless companies in the world. AirTouch's subsidiaries include AirTouch Cellular, AirTouch Paging and AirTouch International. The cellular company's new identity includes a listing on the New York Stock Exchange with the symbol ATI, the addition to Standard & Poor's (S&Ps) 500 list and a BBB S&P credit rating. AirTouch made its April 6 name- change deadline imposed by the Cali- fornia Public Utilities Commision. "The last two weeks have been tumultuous," said Sam Ginn, AirTouch chairman and CEO.

AirTouch's emergence marks the first "baby Bell" wireless spin-off, which, according to Wall Street analysts, may be the only regional Bell operating company cellular spin-off for some time. According to AirTouch, the spin-off occurred for a variety of reasons: It gives AirTouch greater flexibility in aggressively pursuing new technologies to enhance customer service, and it gives the company a better opportunity to broadening its international operations' presence--as an independent entity, AirTouch has greater financial flexibility and freedom from regulatory restraints, Ginn said.

Currently, AirTouch has a presence in 11 countries, including cellular activities in Germany, Portugal, Japan, Sweden and Italy; paging interests in Portugal, Spain, France and Thailand; long-distance services in Japan; and credit-card verification in South Korea.

...PCS Spectrum on the Agenda

The spin-off empowers AirTouch and Pacific Telesis to file for personal communications services (PCS) spectrum separately. The two companies now can take full advantage of bidding for PCS spectrum to enlarge AirTouch's operations realm and to bring Pacific Telesis into the wireless game.

To AirTouch, PCS spectrum is a vehicle to become a third cellular operator in 20 of the top-30 U.S. cellular markets it currently does not serve with cellular. "We are going to be disciplined as to the economic worth of the PCS frequencies...We will not participate in a [spectrum] "feeding frenzy" but only go into markets we don't currently serve with cellular," Ginn said.

"PCS will never overshadow cellular because of the 12-year headstart cellular has on PCS," said Lee Cox, AirTouch president and CEO.

Adding to cellular's advantage, PCS networks will not be built out completely for seven to eight years, Cox added.

The current spectrum auction situation also contributes to cellular's advantege. "The delay in auctions works in cellular operators' favors, Ginn said. "As long as we can keep the current market structure, we benefit."