Bell Atlantic and GTE Agree to Merge
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BELL ATLANTIC AND GTE AGREE TO MERGE
July 28, 1998
Susan Kraus, 212-395-0500,
Eric Rabe, 212-395-0500,
Peter Thonis, 203-965-3326, firstname.lastname@example.org
NEW YORK, N.Y., and STAMFORD, Conn., July 28, 1998 - Bell Atlantic (NYSE:
BEL) and GTE Corp. (NYSE: GTE) will merge in a transaction joining Bell
Atlantic's sophisticated network serving its dense, data-intensive
customer base with GTE's national footprint, advanced data communications
capabilities and long distance experience. The transaction also creates
one of the world's premier wireless communications companies and combines
two companies with extensive and complementary international assets. The
merger of equals was announced today by Bell Atlantic Chairman Raymond W.
Smith, Bell Atlantic Chief Executive Officer Ivan Seidenberg, and GTE
Chairman and Chief Executive Officer Charles R. Lee.
The executives said a hallmark of the transaction is the ability of the
merged company to accelerate its growth by building upon its complementary
strengths to bring new, competitively priced services to millions of
consumers and business customers. It is anticipated that the merged
company, with 1997 combined revenues of $53 billion and a current combined
market capitalization of approximately $125 billion, will target annual
EPS growth of 15 percent, exceeding each company's current expectations.
Under the terms of the definitive agreement, which was approved by the
boards of directors of both companies, GTE shareholders will receive 1.22
shares of Bell Atlantic stock for each GTE share they own. (GTE had
963,241,244 shares outstanding as of June 30, 1998.) The transaction is
expected to be tax-free to shareholders and to be accounted for as a
pooling of interests.
Based on investments they have already made, and the strategic fit between
them, the merged company will immediately have leadership positions and
enhanced growth potential in four key businesses:
Data: GTE is already a major provider of data and advanced Internet
services to consumers and businesses, with one of the industry's most
sophisticated data networks. Bell Atlantic serves millions of the world's
most information-intensive residential and business customers, including
the headquarters of 175 of the Fortune 500 companies, and a huge base of
multinational businesses. The merged company thus combines a major
provider of advanced data services with millions of customers whose demand
for these services is exploding. In addition, both Bell Atlantic and GTE
have committed to aggressive ADSL deployments, positioning the merged
company to be the leading provider of advanced data services to the home.
Wireless: The merged company will be the nation's largest and most
advanced cellular service provider. Together, Bell Atlantic and GTE
currently have 10.6 million domestic wireless customers and more than 100
million cellular POPs. The wireless technologies of the two companies are
both migrating to state-of-the-art CDMA technology and are, therefore,
fully compatible. Moreover, Bell Atlantic and GTE have both demonstrated
the ability to successfully integrate wireless operations and to
significantly enhance their efficiency and profitability.
Domestic: With 63 million access lines, the merged company will provide
the crucial first-mile link to the global telecommunications network for
millions of homes and businesses in 38 states. As the nation's largest
local exchange carrier, and an emerging long distance provider, it will be
able to better serve its customers by using that size and scope to drive
down costs and speed new services to market.
International: With a significant presence in more than 30 countries and
virtually no overlap, the international portfolios of GTE and Bell
Atlantic are focused on some of the world's highest-growth markets. The
merged company will have significant international reach, extending from
Canada to Argentina and from Europe to Asia. In addition, customers in its
service territory currently account for more than 30 percent of the
world's international traffic. Those customers represent an enormous
business opportunity for the merged company when it receives regulatory
approval to handle long distance traffic.
In addition, the merged company will be the world's largest publisher of
Capital investments already made by the two companies in their markets
will enable the merged company to achieve its growth objectives without
major new capital commitments. Moreover, based on anticipated revenue and
cost synergies, the transaction is expected to be accretive to earnings
per share, excluding one-time, merger-related charges, in the first year
Seidenberg of Bell Atlantic said: "This transaction means more choice.
Customers will have access to a complete range of competitively priced
services, and have it far faster than would otherwise be possible.
"The transaction also means more competition. The combined enterprise will
have the financial, operational and technological resources to compete
effectively against the strategies of AT&T/TCI, SBC/Ameritech,
WorldCom/MCI and others, both current and future," Seidenberg said.
Lee of GTE said: "We will be the only telecommunications company that has
it all: a unique mix of local and long distance, national and
international assets, and voice, wireless, data, Internet and other
services. With those competitive advantages "unmatched by any existing or
proposed communications company"we will be well-positioned to better serve
our customers, accelerate our growth and continue to build shareholder
Smith of Bell Atlantic said: "In the new telecommunications environment,
companies with scope, scale, and a clear vision of how best to meet
customer demand will be the industry leaders. Today, we are creating such
Lee and Seidenberg will share responsibility for the management of the
company, and will both serve on the merged company's board. Lee will serve
as Chairman and Co-CEO of the merged company, and Seidenberg will serve as
its President and Co-CEO. Beginning on June 30, 2002, Seidenberg will
become the sole CEO, with Lee continuing as Chairman until June 30, 2004,
when he will be succeeded by Seidenberg. As previously announced, Smith
will retire as Chairman of Bell Atlantic by year-end 1998.
The merged company's board of directors will have equal numbers of
directors designated by Bell Atlantic and GTE. The top management team for
the merged company, which will be named shortly, will be a blend of the
senior managers of both Bell Atlantic and GTE. The merged company will be
headquartered in New York City, with a significant operational presence in
Dallas and other locations.
Lee and Seidenberg said that they expect the transaction to produce cost
synergies totaling $2 billion within three years of completion,
principally related to economies of scale and other operating
efficiencies. It is expected that the merged company will generate an
additional $2 billion in revenue synergies.
The two companies have a total of more than 250,000 employees. Because the
transaction is driven primarily by growth opportunities, not by
opportunities to cut costs by eliminating jobs, it is not expected to have
a material impact on employment levels of the hourly workers of either GTE
or Bell Atlantic. In fact, as the combined enterprise grows, overall
employment levels may increase. In addition, while a small percentage of
overlapping management positions may be eliminated, it is anticipated that
this growth will create many new professional opportunities.
Both GTE and Bell Atlantic have proven track records in successfully
and quickly integrating business operations. For example, GTE today
thrives as a highly focused, integrated company, after a series of major
acquisitions and divestitures over the past decade, including the
acquisition of BBN Corp. in 1997. Bell Atlantic and NYNEX formed a
wireless joint venture in 1994, and the two companies merged in 1997. By
1996, the wireless joint venture achieved a market leadership position
with innovative products, faster customer growth and sharply improved
profitability. The integration of Bell Atlantic and NYNEX is now largely
complete, and is already producing efficiencies greater than those
Bell Atlantic has been a leader in opening its market to local
competition. Seidenberg said: "The key for us, and for our customers, is
our ability to move into new markets faster. We will continue to work
closely with our regulators to expedite the long distance approval process
so the customers of the combined enterprise can realize the benefits of
the merger as quickly as possible."
The transaction, which requires approval by the shareholders of both
companies, expiration of the applicable Hart-Scott-Rodino waiting period
and approval by various regulatory authorities, is expected to be
completed in approximately 12 months.
Bear, Stearns & Co. Inc., Merrill Lynch and Morgan Stanley acted as
financial advisors to Bell Atlantic, and Bear, Stearns and Merrill Lynch
each provided a fairness opinion to Bell Atlantic.
Goldman, Sachs & Co. and Salomon Smith Barney acted as financial advisors
to GTE, and each firm provided a fairness opinion to GTE.
Information contained in this release with respect to the expected
financial impact of the proposed merger is forward-looking. These
statements represent the companies' reasonable judgment with respect to
future events and are subject to risks and uncertainties that could cause
actual events to differ materially. Such factors include: materially
adverse changes in regulatory and economic conditions in the markets in
which the companies operate; substantial delay in the expected closing of
the merger; the ability to achieve the synergies identified; and a
significant change in the timing of, and conditions under which, Bell
Atlantic is allowed to offer long distance services within its region.