July 28, 1998 10:50 AM PDT
GTE, Bell Atlantic shake on it
The merged company will have revenues of $53 billion, the companies said in a statement announcing their plans.
The companies called the deal a "merger of equals." GTE's top executive, Charles Lee, will serve as chairman and co-CEO of the merged company, while Bell Atlantic CEO Ivan Seidenberg will serve as its president and co-CEO. Seidenberg will become the sole CEO beginning in 2002.
Under the terms of the deal, GTE stockholders will receive 1.22 shares of Bell Atlantic stock for each GTE share they own.
GTE shares closed yesterday at 57.94 and fell to 55.75 in after-hour trading. Bell Atlantic shares closed yesterday at 45.19 and fell to 45 in after-hour trading.
The GTE-Bell Atlantic announcement comes on the heels of other megamergers in the telecommunications industry.
Last month, AT&T also announced plans to buy Tele-Communications Incorporated for $48 billion to create a giant capable of providing a variety of tiered services--video, telephony, and high-speed Internet access--in the U.S. market.
"I think this is a good deal. [We] are moving toward total solutions where we've got voice, data, Internet, and IP addresses all under one umbrella," said Jeff Pittsburg, a partner at the investment banking firm of Goldis-Pittsburg Institutional Services. "You've got to put local and long distance back together again in some fashion to make this possible."
With the baby Bells merging to form larger companies, there is a rush to merge to protect market position.
"The transaction also means more competition," Seidenberg said. "The combined enterprise will have the financial, operational, and technological resources to compete effectively against the strategies of AT&T-TCI, SBC-Ameritech, WorldCom-MCI, and others, both current and future."
The two companies have a total of more than 250,000 employees. The merger is "not expected to have a material impact" on employment levels for either GTE or Bell Atlantic workers.
"Bell Atlantic and GTE have committed aggressively to the deployment of technology that brings broadband directly to the home," Seidenberg said during a press conference today. "This will position the merged company to be the leading company providing data-services to the home."
Lee added: "The Internet is one of those exploding things in the world today. GTE has the skills, and we have already invested a lot of money to build our capability in that area."
Consummating the deal is expected to take at least a year because the merger will face regulatory obstacles.
There is no guarantee that the deal will win regulatory approval. GTE currently offers services in some areas dominated by Bell Atlantic, which raises complications with federal telecommunication rules.