GTE, Bell Atlantic agree to $52.8 billion merger

Bell Atlantic Corp. has agreed to acquire GTE Corp. in a stock swap estimated to be worth $52.8 billion, which will see the creation of a new company combining GTE's local, long-distance, wireless and Internet services with Bell Atlantic's local and wireless offerings, the companies announced today.

The deal means that GTE will become part of Bell Atlantic. Under the terms of the agreement, GTE shareholders will receive 1.22 shares of Bell Atlantic stock for each GTE share they own, the companies said in a statement today.

GTE's Chairman and CEO Charles Lee and Bell Atlantic's CEO Ivan Seidenberg will share the management of the company. Lee will have the title of chairman and co-CEO, while Seidenberg will serve as president and co-CEO, the companies said.

The companies anticipate the merged company, which represents 1997 combined revenues of $53 billion, will grow by 15% per year. Lee and Seidenberg said they expect to reduce costs by a total of $2 billion in three years due to economies of scale and other operating efficiencies. The merged company is expected to generate an additional $2 billion in revenue per year.

GTE and Bell Atlantic do not anticipate any of their combined 250,000 employees will lose their jobs, although a very small number of management positions may be eliminated, the companies said.

The GTE/Bell Atlantic merger, if approved by federal and state regulators, would allow the combined company to offer both local and long-distance telecom services. Such a state of affairs could potentially violate the provision of the breakup of AT&T back in 1982 that restricts regional Bell operating companies, the so-called Baby Bells, from offering long-distance service.

According to the U.S. Telecommunications Act of 1996, if regional telcos providing local services also want to offer a long-distance service, they must demonstrate that they have opened up their local loop to competitors before they can provide long-distance within their service area. Bell Atlantic has not passed the test and therefore has thus far not been given the regulatory authority to provide long-distance service.

The combined Bell Atlantic-GTE company could elect to offer long-distance service only in areas outside of the Bell Atlantic service area, but still, regulators might oppose the deal simply because of the size and nationwide scope of the alliance.

The two companies could also face regulatory headaches because of their overlapping wireless services in several U.S. states.

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