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Telecoms call on markets
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July 27, 1998: 8:34 a.m. ET
Reports that GTE, Bell Atlantic are mulling $55B tie may not offset Asia
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NEW YORK (CNNfn) - A brave new world of telecommunications deals dawned on Wall Street Monday as investors awoke to the news that Bell Atlantic and GTE are in talks about a powerhouse merger that could be worth as much as $55 billion.
But any market rebound may be checked Monday by tumult in Asia, where Tokyo's Nikkei index dove more than 2.5 percent on concern about the selection of a new cabinet by Japan's prime minister-designate Keizo Obuchi. European markets opened mixed, unsettled by Asia's jitters and the Dow's previous-week losses.
Prices for futures contracts on the Globex system, used to gauge trends on the Dow, were off 4 points in London, at 1,143.40, pointing to a 30 to 35 point opening dip when markets open in New York.
The 30-year benchmark Treasury bond was down 9/32 in price, with the yield at 5.68 percent.
The merger flash came less than 24 hours after telecom monoliths AT&T and British Telecom agreed to form an $11 billion joint venture to provide multinational business customers with voice, video and data services.
Investors are looking to the marriages -- which are of widely varying scope and value -- to help dispel the glum mood that fueled a more than 404 point, or more than 4 percent, drop in the Dow Jones industrial average last week.
Robert Wilkes, an analyst with Brown Brothers Harriman, said he views the latest link-ups as a prelude to the further whittling of the candidate pool for future consolidation. Would-be partners, he suggested, will have to speed up their courtship.
"As each merger takes place, there are fewer and fewer dance partners to hook up with, and I think we're moving in that direction," Wilkes said.
A Bell Atlantic-GTE link would be subject to intense scrutiny by regulators, who undoubtedly will focus special concern on the companies' wide-ranging cellular assets. A deal would offer Bell Atlantic a springboard into fiercely-contested long-distance markets.
Shares of Bell Atlantic (BEL) ended up 1-3/16 at 45-3/16 Friday, while GTE (GTE) closed up 1-1/2 at 57-15/16. AT&T (T) stock was up 2-7/16 at 62-6/16 in pre-open trade Monday in London. British Telecom shares soared nearly 12 points in the pre-open to 149-1/2.
Communications equipment maker Motorola (MOT) reportedly is set to announce that it has shipped 170,000 cable modems through the first seven months of 1998. If sustained at that rate, Motorola will quadruple sales this year of the product which, among other applications, speeds consumer access to the Internet.
Motorola stock ended down 3/8 at 51-1/4 Friday on the New York Stock Exchange.
Qwest Communications International (QWST) posted better-than-expected results, reporting second-quarter loss of 6 cents a share, as compared with 3 cents a year earlier. The results excluded a charge for Qwest's merger with LCI.
Wall Street analysts surveyed by First Call had forecast a loss of 10 cents a share. Qwest stock closed up 7/8 Friday, at 43-1/8 on the Nasdaq.
American Airlines is said to want to modernize its fleet by placing an order with Boeing for up to 18 new jets to replace aging DC-10s. American (AMR) stock ended off 1-11/16 at 71-1/8 Friday; Boeing (BA) shares eased 7/8 to close at 40-5/16.
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