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FCC: Merger to Lead to Separate Firm for Bell, GTE

Bell Atlantic Corp. will complete its $65 billion merger with GTE Corp. by the end of June after the merged company transfers all of GTE's Internet business into a separate public company, newly dubbed Genuity.

The Federal Communications Commission late Friday conditionally approved applications to transfer control of licenses and lines from GTE to Bell Atlantic.

In addition to its backbone spin off, the merged company must comply with 25 regulatory conditions for the deal, which the FCC designed to enhance local phone competition in the companies combined services areas.

The Commission dangled a potentially huge profit-marketing carrot for the merged company to devour in five years if it can open up local competition in the U.S.

Specifically, the merged company will give to Genuity shareholders any gain in is value that is attributable to its operations in during the half-decade in which the combined company is restricted from offering long distance services. This provides a powerful incentive for Bell Atlantic to accelerate its efforts to open its local phone markets to competitors.

Under the ruling, Bell Atlantic cannot convert its permissible 10 percent interest in Genuity into a greater equity ownership unless it receives long distance approvals covering 95 percent of its region where Genuity operates.

Charles R. Lee, GTE chairman and chief executive officer of GTE and designated chairman and co-chief executive of the merged company, said it's a great day for Bell Atlantic and GTE.

"We've won approval of our merger from shareholders, the Department of Justice, state regulators and from the FCC," Lee said. "This final approval contains reasonable conditions that clear the way to unite these two great companies into Verizon Communications.

Lee added that the new company is well prepared to become a formidable force in global communications.

"We will be a world-class competitor able to bring innovative telecommunications services to customers across the country," Lee said. "We are on track to close the merger by the end of this month."

Ivan Seidenberg, Bell Atlantic chairman and chief executive officer, designated president and co-chief executive of the new company, said the FCC adopted conditions proposed by the two companies that make the merger both pro-competitive and pro-consumer.

"The FCC recognizes that this merger uniquely combines complementary assets that will generate enormous public interest benefits," Seidenberg said. "We look forward to creating the next great brand in communications, one that will set the standard for global communications companies."

William Kennard, FCC chairman, said when it comes to regulating the telecom industry in the era of convergence, it must be mindful of over-consolidation.

"There will be those that claim this merger brings us closer to a reemergence of 'Ma Bell,' however my support is predicated on the applicants' enforceable commitments to open their traditional local markets to competitors, invest in new markets, and accelerate deployment of broadband technologies," Kennard said. "The end result should produce more competition not less."

As a result the Commission's official go-ahead, Genuity, a tier-one Internet backbone, will sell 90.5 percent of its equity to the stock-seekers through an initial public offering.

Verizon Wireless Communications Corp. was formed in April from a joint venture that combined Bell Atlantic's U.S. wireless assets with Vodafone AirTouch and Pri