Bell Atlantic-GTE deal wins Justice Dept.'s OK

Divestitures required

FCC to probe merger

Telecommunications

May 08, 1999|By BLOOMBERG NEWS SERVICE

WASHINGTON -- Bell Atlantic Corp. won U.S. antitrust clearance yesterday for its $82.4 billion purchase of GTE Corp., overcoming a key hurdle in its bid to form the largest U.S. phone company.

Bell Atlantic and GTE, the nation's No. 3 telephone company, secured the Justice Department approval after agreeing to preserve competition by selling wireless service operations in 65 local markets, including Chicago, Houston, Richmond, Va., and Tampa, Fla.

The Justice Department said it is one of the largest such divestitures ever required in a merger.

Maryland Public Service Commission officials said the divestitures did not affect the state.

The combination faces a more challenging hurdle at the Federal Communications Commission, where Chairman William E. Kennard signaled telephone company mergers would get tough scrutiny.

The FCC also is carefully examining another combination of phone giants, SBC Communications Inc.'s proposed $84.7 billion purchase of Ameritech Corp.

"The FCC is treading on eggshells," said analyst Linda Varoli of Merger Insight. "Congress wants them to speed up decisions, but the FCC wants to be seen as protecting the public interest."

The FCC's staff said the SBC-Ameritech combination, two companies formed by the 1984 breakup of AT&T, should be rejected as anti-competitive unless changes are made. Kennard suggested that the FCC would impose some conditions.

In March, he said the FCC was concerned that the SBC-Ameritech and Bell Atlantic-GTE combinations would impair development of competition for local phone markets.

Bell Atlantic shares rose $2.5625 yesterday, to close at $58.1875. GTE shares rose $2.75 to $67.

Bell Atlantic and GTE hailed the Justice Department's decision.

The antitrust settlement "underscores that this merger will strengthen competition and deliver to consumers a new, top-tier telecommunications provider that will rival existing and emerging national and global carriers," said William P. Barr, executive vice president and general counsel for GTE.

The Justice Department charged in a lawsuit that the combination would have resulted in a loss of direct wireless competition in the 65 urban and rural markets.

In 46 of those markets, GTE owns a cellular system while another is owned by PrimeCo Personal Communications LP, Bell Atlantic's joint venture with AirTouch Communications Inc., the government said.

GTE is also acquiring 15 cellular systems from Ameritech in markets where PrimeCo owns the personal communication system wireless business.

"Without the divestitures required by this consent decree, competition in 65 markets would likely have been reduced, causing higher prices or lower quality wireless telephone services for poten- tially millions of subscribers," said Joel Klein, the agency's top antitrust enforcer.

"Wireless mobile telephones are increasingly becoming an important part of everyday life for an ever-growing number of Americans, and we rely on competition to ensure that customers get the lowest prices," Klein said.

The combination also faces review by state utility commissions. State regulators in Kentucky and Virginia have ordered the companies to provide more evidence that their combination would help consumers.

Pub Date: 5/08/99

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