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Bell Atlantic, GTE Sacrifice Backbone

Potential telecom partners Bell Atlantic Corp. and GTE Corp. Friday officially offered to divest most of GTE's Internet business in order to obtain regulatory approval for their merger.

Last year, Bell Atlantic (BEL) proposed to resolve the regulatory issue by placing the Internet business in a trust, but the Federal Communications Commission said the plan was insufficient.

Under the new proposal, the Internet backbone and related data business of GTE Internetworking would be transferred to a corporation owned and controlled by public shareholders and operated independently of the merged Bell Atlantic-GTE (GTE).

The merged company would retain 10 percent equity interest as permitted by the Telecommunications Act of 1996. The proposal includes an option that the merged company maintain the right to buy back the unit in five years, if Bell Atlantic receives FCC permission to merge.

Tom Tauke, Bell Atlantic senior vice president, said the divestiture would produce a new publicly owned company and would fulfill regulatory requirements.

"Under this proposal the ownership and control of GTE Internetworking will be transferred to new shareholders through an initial public offering," Tauke said. "This addresses the long distance issue in a way that lives up to both the letter and the intent of the 1996 Telecommunications Act."

The FCC routinely requests public comment on the filing before taking further action. The Justice Department approved the merger last year, but the FCC has delayed deal because of the Internet long distance issue.

The merger would reportedly create the largest U.S. local phone company with combined revenues of over $58 billion in annual sales.



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