AirTouch and U.S. west announce joint venture close; new management organization named
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WALNUT CREEK, CA -- AirTouch Communications (NYSE:ATI) and U S WEST (NYSE:USW) today moved a step closer to a merger of their domestic cellular operations. The companies operate in 16 of the nation's top 30 markets, an area populated by nearly 55 million people.
Effective November 1, the companies will enter the first phase of their joint venture, Phase I.
During this phase, the companies' Wireless Management Company (WMC), formed to serve as a single management resource, will begin providing support services to both companies' domestic cellular operations, which will remain separately owned during this phase. Phase I follows the completion of contractual agreements between the two partners, regulatory approvals, and U S WEST's exchange of its San Diego cellular property for several GTE cellular properties including Portland, Oregon. AirTouch and U S WEST initially announced joint venture and merger plans on July 25, 1994, adopting a phased approach.
The next phase, Phase II, will be a merger of the two companies' domestic cellular operations into the WMC. This will take place upon the earlier of July 25, 1998, the lifting of certain regulatory restrictions imposed on U S WEST in connection with the breakup of the Bell System, or at AirTouch's option.
"We hope Congress provides legislative relief this year so that AirTouch, U S WEST and our customers can fully realize the benefits of scale and scope from merging our operations," said Lee Cox, president and chief executive officer of the joint venture.
"U S WEST and AirTouch share a strategic vision, operating philosophy, and management approach," said Jan Peters, president of Wireless Operations and Investments for the U S WEST Media Group and CEO of its cellular business U S WEST NewVector. "This partnership will enable us to effectively pool our resources and wireless operating expertise as well as strengthen our competitive position."
STRONG MANAGEMENT TEAM NAMED
A strong team of 14 veteran cellular operating management and staff professionals hold key management posts in the joint venture.
"We've built a largely decentralized organization designed to put accountability and decision-making into the hands of the employees who are closest to our customers," explained Cox. "This team has an impressive track record for running cellular ventures and will provide continuity for our customers and employees," he added.
An experienced team of seasoned executives hold senior staff positions in the WMC. They include Craig Farrill, chief technology officer; Ujjal Kohli, vice president of marketing; Mike Polosky, chief information and process engineering officer; Dick Hegstrom, vice president of finance, Tracey Borst, vice president of human resources; and Wally Sleeth, vice president of legal.
Six executives currently have responsibility for the day-to-day domestic cellular operations that serve more than three million customers across the country. From AirTouch Cellular, reporting to Lee Cox, are Brian R. Jones, executive vice president and general manager (EVP/GM) for Los Angeles; Gary Schindler, VP/GM for Sacramento; Nancy Hobbs, VP/GM for San Diego; and Terry Tindel, VP/GM for Atlanta. Reporting to Jan Peters are U S WEST's Tim Samples, area general manager for the Southwest region, and Julie Berg, vice president - marketing, distribution, and customer operations, who has responsibility for all other NewVector markets.
Jan Peters, in addition to her role as CEO for U S WEST NewVector, has been promoted to the additional position of president - Wireless Operations and Investments for the U S WEST Media Group. In her new role, Peters will oversee both U S WEST's joint venture with AirTouch including their 50/50 partnership in PCS PrimeCo, and the national alliance that includes Bell Atlantic NYNEX Mobile.
When merged in Phase II, AirTouch and U S WEST will hold interests of approximately 70 and 30 percent, respectively, in the combined cellular properties. During Phase II, both companies will report the combined operating results of the WMC, reflecting their portion of the venture, using the equity method of accounting. In the future, U S WEST also has the option to exchange its interest in the WMC for an equity interest in AirTouch that would permit representation on the AirTouch board of directors.
As a result of the Phase II merger, it is possible that AirTouch could experience some short-term earnings dilution, which could be material, depending on when the merger occurs. AirTouch also may experience some near-term, minor earnings impact prior to the Phase II merger as a result of entering into the support relationship(a).
In the future, but no earlier than the closing of the Phase II merger, the two companies' equally-owned PCS partnership also will be contributed to the WMC. When the PCS partnership is contributed, AirTouch's proportional PCS expenses will increase to reflect its adjusted ownership interest in the WMC. AirTouch expects the PCS partnership will have significant capital requirements for the buildout of PCS markets and will experience substantial operating losses associated with the start-up phase of the PCS business which is expected to last several years.
AirTouch Communications is a global wireless communications company, with interests in cellular, paging, personal communications services, the Globalstar satellite system and other operations in the United States and twelve other nations: Belgium, Canada, France, Germany, India, Italy, Japan, Portugal, South Korea, Spain, Sweden and Thailand. The company, based in San Francisco, serves more than 4.2 million customers worldwide.
U S WEST, headquartered in Englewood, Colorado, is in the connections business, helping customers share information, entertainment and communications services in local markets worldwide. It offers domestic cellular service through its subsidiary, U S WEST NewVector, which operates in 13 midwestern, western and southwestern states and serves more than 1,000,000 customers. The company also operates wireless communication systems, cable TV and telephone networks in the United Kingdom, Hungary, the Czech Republic, Slovakia and Russia, France, Norway, Sweden and Lithuania. (a) Refer to AirTouch Form 8-K filed today with the Securities and Exchange Commission for more information regarding the effects of Phase I and Phase II. You may also contact AirTouch for a copy of the report.
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