Nynex is merging with Bell Atlantic New phone company to be 2nd largest in U.S., sources say

Bell Atlantic name is kept

Rates are not likely to decline

it's unclear if layoffs are involved

April 22, 1996|By NEW YORK TIMES NEWS SERVICE

NEW YORK -- Ending a prolonged and public courtship, Bell Atlantic Corp. and Nynex Corp. agreed yesterday to one of the largest corporate mergers in U.S. history, people involved in the negotiations said.

The two regional telephone companies plan to announce the deal today at a news conference in New York, after a weekend of deliberations in which their boards unanimously approved the merger.

The merger, coming after two years of on-again, off-again talks, would create the second-largest phone company in the United States after AT&T -- with a stock market value of $51 billion, annual sales of close to $27 billion, 127,600 employees and more than 36 million customers in 13 states, from Maine to Virginia.

Its dominion would include the nation's financial and political centers, New York City and Washington, as well as major population centers. One analyst estimated that 30 percent of the tTC nation's long-distance phone calls originate in the Bell Atlantic-Nynex region.

For consumers, the merger will have no immediate impact because the companies do not compete with each other directly. And even after a merger is complete, state regulators would maintain significant influence over the local telephone business within each state's borders.

But executives close to the companies said the deal could result in 1,000 to 2,000 lost jobs. They said the cuts would affect corporate executives, rather than operators or cable splicers.

Union officials, fearing a bigger negative impact, say they will oppose the merger.

"Neither consumers nor workers will be well served by a merger," said Jan Pierce, the vice president of the Communications Workers of America, which represents 70,000 employees at Bell Atlantic and Nynex. "We will oppose the merger with every resource available to us."

The deal is subject to approval by federal and state regulators, as well as by the Internal Revenue Service and the Securities and Exchange Commission.

It continues a reassembling of the Bell System that was foreshadowed by the congressional overhaul of the nation's telecommunications laws in February and began in earnest earlier this month when SBC Communications and Pacific Telesis announced they would become the first of the seven Bell companies to join forces.

"This is another step in the inexorable march of telecommunications to a world of four or five giant players," said Eli Noam, the director of the Columbia University Institute of Tele-Information and a former commissioner on the New York State Public Service Commission.

"This negotiation was a series of 'gets' and 'gives,' " one person close to the discussions said yesterday. "For everything we got, we had to agree to give up something else."

Among other trade-offs, said one executive, the companies agreed that the combined company would be based in New York City but would carry the name Bell Atlantic. Officials from Bell Atlantic and Nynex declined to comment on those issues.

People close to the deal said the merger values Nynex at roughly $21 billion, making it the largest merger in telecommunications and the fifth-largest deal ever. Based on their latest stock prices, the companies would have a combined market value of $51 billion.

Under the terms of the deal, shareholders of each company would swap their existing stock for shares in a new entity. Bell Atlantic has a greater market value than Nynex, so shareholders would tender at a ratio of roughly six shares of Bell Atlantic for every five of Nynex.

Because the boards of both companies had been briefed exhaustively about the merger, people close to the talks said the final meetings this weekend were largely devoted to going over these details.

Bell Atlantic's directors met for several hours Saturday in Philadelphia; Nynex's board voted yesterday after a telephone conference call lasting barely two hours.

Executives close to the deal would not disclose the precise terms of the deal yesterday. But people with knowledge of the agreement said Nynex would be valued at a discount to its current stock market value of $53 a share.

Bell Atlantic had sought the discount because speculation about a deal has driven up Nynex's shares 31 percent since April 1995.

Unlike Nynex and most other telephone companies, which usually display a well-rehearsed humility in deference to state and federal regulators, Bell Atlantic has been willing to bare its teeth.

While Nynex, under pressure from New York regulators, has steadily opened its local markets to rivals, Bell Atlantic has sued interlopers.

While Nynex competes, almost politely, on the basis of price and quality, Bell Atlantic runs attack ads -- as when Sprint introduced a new wireless phone service in Washington last year and Bell Atlantic compared the new phones to bananas.

And while Nynex has collaborated closely with the Communications Workers, Bell Atlantic has become the union's biggest antagonist. The CWA said last week that its members would picket Bell Atlantic's annual meeting, which is scheduled for Friday in Wilmington, Del.

While Nynex has trailed the other Bells in growth and profits, Bell Atlantic has consistently been near the front of the pack, operating more efficiently and with fewer service problems than Nynex -- or most other Bell companies, for that matter.

The geographic proximity will be an enormous advantage as Bell Atlantic and Nynex expand into long-distance service. By changing the software in their existing telephone networks, the two companies could have immediate access to a huge potential long-distance market.

Pub Date: 4/22/96

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