GTE Corp. has opted to spend $224 million to purchase the remaining shares of Contel Cellular Inc. it doesn’t already own.
As part of the deal, GTE will spend $22.50 for each of the 9.95 million Class A Contel shares remaining, according to GTE spokesman Jeff Keller. The company said it hopes to complete the deal by the end of the year.
GTE announced in July 1990 that it would acquire Contel’s parent company, Contel Corp., for about $6.2 billion. The deal closed in April the following year, but because Contel owned only 90 percent of the stock in its mobile communications subsidiary, Contel Cellular, GTE has had to acquire the remaining 10 percent from the public.
GTE should be able to
operate more efficiently
as sole owner of
Contel Cellular.
GTE plans to meld Contel Cellular into a newly formed subsidiary, according to Keller. GTE’s Class B shares reportedly will be converted into shares of the combined entity. GTE is proposing the merged company be operated under the GTE Mobilnet name.
Wall Street reacted favorably to news of the deal. Contel shares jumped $5.75 to close at $23.50 on Sept. 8 following the announcement. GTE closed at $30.88 that day, up about 13 cents per share. Reaction was, in part, spurred by the fact that GTE should be able to operate more efficiently as sole owner of Contel Cellular, rather than having to keep management separate and file separate financial reports with federal regulators.
“Cost savings are immediately uncovered,” said Fred Moran Jr., an analyst for Salomon Brothers Inc. in New York. The merger will eliminate paperwork since each company has had to file separate quarterly reports with the Securities and Exchange Commission. The new entity also is well positioned to try to seek strategic partners for personal communications services licenses, Moran noted.
Contel and GTE have both been forces in the cellular industry. In February 1990, Contel purchased a number of cellular markets from McCaw Cellular Communications Inc. for $1.3 billion. At the same time, GTE was independently acquiring cellular markets from Providence Journal Co. for about $710 million.
Combined, along with existing holdings at the time, the merged GTE and Contel created the second largest cellular operator in the United States with about 515,000 customers. RCR’s recent list of Top 20 Cellular Carriers tags GTE Mobilnet as the nation’s fifth largest operator with about 1.06 million customers. Contel is listed separately and ranked 12th with 521,000 customers (RCR, April 11, 1994, p. 18). The completed merger will give the entity more than 1.5 million customers.
