Bell Gigantic

It's only fitting that with Godzilla in movie houses across the world that we see an epic of even greater proportions play out in our own territory. Between MCI/WorldCom (Rodan), AT&T/BT (Gargantua) and Bell Atlantic/GTE (Bell Gigantic), we have all the fixings for Godzilla II.

Why the push to merge right now? Wall Street isn't demanding it. In fact, the Street has been pretty negative on most of these major mergers: They cost too much; provide little financial incentive; create new corporate infrastructures that are too large to manage; and very often result in too much money being spent on regulators and lawyers.

Do they merge to provide new benefits to customers? Nope. Most of these mega-mergers result in fewer competitive choices in the open market. They don't even join together because they are losing money.

Instead, these big providers are combining because they fundamentally believe that bigger is better. Nobody wants to be the little kid on the block.

But while these companies are assuaging their own insecurities, their combinations don't make much sense for the general public or market makers. Here's a list of concerns.

1. This deal may never happen. There is a very good chance that this proposal could sit in a regulatory nightmare for the next 12 months as the FCC and Congress hash out the inherent anticompetitive issues surrounding an RBOC owning a major CLEC/IXC/ISP provider.

2. GTE and Bell Atlantic appear to be as far apart as Bill Clinton and Ken Starr from a management perspective. Integrating a fast-moving independent firm into a somewhat large regulated firm might prove to be difficult at best.

3. Stockholder approval may be extremely difficult as GTE shareholders are basically selling at a loss. When was the last time you saw somebody excited about selling an asset at less than market value?

4. Where has all the competition gone? GTE was a solid competitor to Bell Atlantic in many regions. With GTE sitting in the back pocket of Bell Gigantic, we may find that costs and services take a turn for the worse.

Until these issues are hammered out, the best thing that users can do is sit back and wait for the dust to settle. When it does, we expect that there will be a good window of opportunity prior to the actual merger to make some very good deals. But don't wait too long. Once this baby is complete, rates probably won't be going down or service levels up.

If you'd like to find out more about this event, head online to the Public Reports section of our Web site.