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
meCo. The mobile initiative will be
strengthened by the addition of GTE’s wireless assets to the original deal.
The wireless foursome becomes one of the nation’s largest wire-free
companies, serving more than 25 million wireless phone and 4 million paging
customers. Its nationwide footprint covers more than 90 percent of the U.S.
population and 96 of the top 100 U.S. wireless markets, with 232 million
combined points-of-presence.
Verizon will retain a 9.5 percent equity interest in Genuity, as permitted
by the Telecommunications Act of 1996. It also has the option to increase
its ownership interest to as much as 80 percent, if it gains long distance
entry in all Bell Atlantic states within five years. Until then, Verizon
will be able to enter into joint marketing agreements with Genuity in
states where Verizon can offer long-distance.
Moving quickly to regain control of Genuity, Seidenberg and Lee said they
are confident in the new company’s ability to secure long distance approval
in its Bell Atlantic service area.
“Our merger will be a transforming event for both of our companies,” Lee
said. “It will enable us to offer customers the richest array of
high-growth communications services over the most extensive national
footprint and in the world’s most attractive markets.”
“The scale, scope and market reach of Verizon will position us to
capitalize on the ‘new economy’ growth trends that are shaping
communications in the U.S. and around the world,” Seidenberg added. “Our
ability to deliver a full plate of voice, data, Internet and wireless
services to all our customers will make Verizon the next great brand in
communications.”
In domestic wireline telecommunications services, Verizon will unite GTE’s
primarily suburban and rural operations with Bell Atlantic’s operations in
13 Eastern states and the District of Columbia. The formidable union owns
more than 63 million access lines and the equivalent of 32 million
additional high-speed data circuits. Verizon’s wireline operations will
reach one-third of all U.S. households and serve two-thirds of the top 100
markets, including nine of the top 10 major metropolitan service areas.
Verizon intends to aggressively target data markets to develop its digital
fiber optics network. In doing so, Verizon is well positioned to distribute
a comprehensive suite of high-speed e-commerce services and digital
subscriber line access.
