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MCI in AirTouch bid?
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January 7, 1999: 4:12 p.m. ET
Company reportedly could enter three-way fray with offer this week
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NEW YORK (CNNfn) - Long-distance carrier MCI WorldCom may be ready to enter the bidding war to acquire cellular phone giant AirTouch Communications Inc., according to published reports.
The company, according to a report Thursday in USA Today, is planning to outbid British mobile phone leader Vodafone's $55 billion stock-and-cash offer made earlier this week.
MCI WorldCom (WCOM), according to the report, will make an all-stock offer sometime this week. MCI officials declined to comment on the report.
Sources familiar with MCI told Reuters, however, that the company is not currently planning to bid for the company, though they did not rule out the possibility that MCI would consider a bid in the future.
The past week has been a heady one for AirTouch (ATI), which confirmed Sunday it received a $45 billion all-stock takeover offer from Bell Atlantic Corp. (BEL). Vodafone - which had been negotiating with AirTouch for more than a year, according to USA Today - jumped into the pool Tuesday with a whopping $55 billion offer.
Now, MCI WorldCom, which doesn't yet have wireless properties and would have felt some of the toughest competition if AirTouch were to merge with Bell Atlantic or Vodafone, apparently is moving in.
Analysts said long-distance carriers are rapidly coming to realize the importance of offering wireless service to their customers.
"What (MCI is) saying is, 'We really do believe in the residential customer,' " said Bruce Roberts, telecommunications analyst at Dresdner Kleinwort Benson. "They will be able to hold on to customers a whole lot more tightly and they'll have a lot less customer attrition because they'll be able to offer a bundle of packages, which in today's telecom world includes wireless."
A bid would also constitute a break from the company's past strategy. MCI Chief Executive Bernard Ebbers has told analysts in the past that he doesn't consider wireless services a necessary component of MCI's offerings.
"(Ebbers) sees how much AT&T 's (T) success in the wireless [business] has helped that stock," Roberts said. "I think he's come to realize that wireless prices are probably not headed down in the near future, so he better move sooner rather than later."
One analyst speculated that AirTouch would likely place a higher priority on MCI's offer.
"If they are really in, they are in first place at this point," said Robin Lochner, a telecommunications analyst with Deutsche Morgan Grenfell. "Given a choice of owning Vodafone, Bell Atlantic or WorldCom stock, shareholders would chose WorldCom -- unless Vodafone or Bell Atlantic significantly raise their offers."
Vodafone ready for battle
Analysts said that's exactly what Vodafone would do in the event of a higher bid from MCI. AirTouch is seen as a strong match for Vodafone's international ambitions.
"I think it makes more of a difference for Vodafone than it does for the others," said John Tysoe, an analyst at SG Securities. For Vodafone, this is the opportunity to create a global giant specializing purely in mobile without the distraction of fixed networks."
A merger of Vodafone and AirTouch would create the world's biggest wireless telecom group with a market value of over $110 billion and some 23 million customers around the globe.
But the bidding line may grow longer still. USA Today said rumors are circulating that Mannesmann, AirTouch's German ally, is considering a bid. Could there be any more out there?
"You never know," said Chris Larsen, analyst at Prudential Securities. "After Bell Atlantic, I would have said it's all over but the crying."
MCI shares fell 3-3/16 to 75-3/16 in late trade. Shares of AirTouch were up 1-7/8 at 81-3/4. 
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