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BBN gets a call from GTE
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May 6, 1997: 8:47 p.m. ET
Local telephone leader will acquire Internet pioneer for $616 million
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NEW YORK (CNNfn) -- Local telephone company GTE Corp., in a move to continue its expansion into other areas, said Tuesday it has agreed to purchase BBN Corp. in a deal worth $616 million.
Under the merger, approved by the boards of directors at both companies, GTE will acquire all of BBN's outstanding common shares at a price of $29 per share.
Through the BBN purchase, GTE is trying to strike at AT&T and other phone companies which are claiming stakes on the Internet.
"This is an offensive strategy, this is not defensive. This is a way to grow this company and move it forward," said Chuck Lee, chairman and CEO of GTE.
GTE said that with the acquisition of BBN it hoped to create a broadband national Internet backbone network and provide "one-stop" shopping services for its customers.
"Offering a whole range of services to your customers -- Internet, local phone services, long distance services on one bill -- that's the holy grail, that's the ultimate goal," said Adam Schoenfeld, Internet analyst with Jupiter Communications.
GTE also said it will buy more than a billion dollars' worth of equipment from Cisco Systems to develop data and Internet services, in hopes of challenging AT&T, which has nearly a million Internet customers.
"AT&T's strategic problem is it doesn't have access to its customer," said Scott Cleland, a telecommunications analyst with Washington Research Group. "AT&T needs to get back to the customer and have direct contact either through a bill or Internet access."
BBN has been under contract to AT&T for two years, providing network facilities for AT&T's Internet service.
Analysts say other telephone companies may now consider merging with Internet access providers, many of which have seen their stocks drop from euphoric levels a year ago.
GTE is the nation's largest local phone company with revenues of $21 billion last year. On Monday, it agreed to pay $485 million to buy capacity on a new fiberoptic network being built by Qwest Communications Corp.
BBN is a provider of Internet services, such as Web site hosting, network security and consulting. Its past credits include the creation of ARPANET, which later became the Internet.
However, the company has not translated those achievements into solid business success. In fiscal 1996, BBN had a loss of $56 million, or $3.18 per share, on revenue of $217 million.
Shares in BBN soared 6-1/4 to 28-7/8 on Tuesday, while GTE fell 2-3/8 to 45. 
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GTE
BBN Corp.
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