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Vodafone-Bell Atlantic pact
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September 21, 1999: 2:35 p.m. ET
U.K. firm to join in forming new U.S. mobile telephone venture
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NEW YORK (CNNfn) - Bell Atlantic and Britain's Vodafone AirTouch PLC agreed to a much-anticipated deal early Tuesday to form a new wireless telephone network in the United States that will be able to serve 90 percent of the U.S. population.
The companies had admitted they were in talks last week.
Under terms of the venture, Bell Atlantic will give Vodafone a 45 percent stake in the new business in exchange for Vodafone's $15 billion wireless network. Bell Atlantic will manage the venture -- which will have assets of $28 billion -- and control a majority of seats on the new board.
The deal combines the nationwide mobile telephone network of New York-based Bell Atlantic (BEL), the biggest of the country's "Baby Bells," with the U.S. holdings of Vodafone (VOD), the world's largest cellular provider. The venture also will draw on the cellular assets of Texas-based GTE Corp. (GTE), whose merger with Bell Atlantic is expected to close early next year.
What that means for Bell Atlantic and Vodafone customers is that they will be able to use their wireless phones almost anywhere in the country without having to pay extra "roaming" charges for out-of-area calls.
The companies said the new operation will serve about 20 million wireless customers and 3.5 million paging customers throughout the United States, making it the largest cellular provider in the country. The deal is expected to close in six to 12 months.
The deal will create a formidable challenger to mobile service providers AT&T Corp. (T) and Sprint PCS (PCS), but telecom analyst Phil Wohl of S&P Equity Group said there's more than enough business for everyone to get a bite. Penetration of the U.S. market is still low, and the number of cellular phone customers in the country is growing by about 25 percent each year, he said.
"The pie is so large they all can have a huge slice," he said. For customers, he said, "it's wonderful .. the more companies you have operating on the national level, the better prices will be."
Wohl rates Vodafone shares as a "buy" and has an "accumulate" rating on Bell Atlantic.
Bell Atlantic will manage the new business, which it sees as a way to attain the national reach it has sought in its attempt to be a leading participant in wireless communications. The regional telecom now operates primarily on the East Coast. Vodafone's U.S. assets are in the Southwest and West Coast.
"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," Bell Atlantic CEO Ivan Seidenberg said.
The pact also signals a rapprochement between Bell Atlantic and Vodafone after the British company outbid Bell Atlantic for control of AirTouch earlier this year. After that deal, Bell Atlantic dissolved its existing PrimeCo joint venture with Vodafone.
By early afternoon, Bell Atlantic stock was off its highs for the day, but still up 13/16 to 64-7/16. In London, Vodafone stock closed up 16 pence to 1,313 and Vodafone ADRs, trading near their highest levels ever, gained 4-3/4 to 216-3/4 in afternoon trade in New York.
New venture as spin off?
The companies could decide to split the venture off as a separately traded stock. In the statement announcing the deal, Vodafone said that after three years, it could sell shares of the wireless business through a holding company in an IPO. Bell Atlantic could initiate an IPO at any point after the deal closes, but Vodafone will be entitled to participate in any such move.
The deal already has been approved by the boards of both companies. Regulators and Vodafone shareholders must approve the plan. 
-- from staff and wire reports
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