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CELLULAR ARMS OF REGIONAL BELL COMPANIES CHOOSE CONSOLIDATION

Consolidation in the cellular industry is galloping ahead-now spurred faster by the 1996 Telecom Reform Act-but toward an uncertain future.

The ten largest cellular carriers served nearly 27 million subscribers at year-end 1995, not counting the subscribers in the markets where they hold minority stakes. That’s about 79 percent of the total subscribers in the United States.

Long before deregulation, things were set in motion when AT&T Corp. announced in 1992 it wanted back into the local loop by first making a strategic alliance with McCaw Cellular Communications Inc. and then acquiring the company outright for $11.5 billion.

To close the deal in September 1994, AT&T had to obtain special dispensation from the 1982 consent decree which originally broke up the telephone giant into seven regional Bell operating companies separated from the equipment manufacturing and long-distance services retained by the parent. AT&T also gobbled up the 48 percent interest in Lin Broadcasting Corp. that McCaw didn’t already own.

Unable to derail the AT&T-McCaw merger with a preliminary injunction, Bell Atlantic Mobile and Nynex Mobile Communications announced they would merge their cellular operations into a new $13 billion company: Bell Atlantic Nynex Mobile.

Not to be outdone, AirTouch Communications-the cellular spinoff of Pacific Telesis- said it would merge its domestic cellular operations with those owned by U S West Inc., a relationship it is about to consummate. The company recently announced it also would buy the assets of the New Par joint venture it has with Cellular Communications Inc.

At about the same time Bell Atlantic/Nynex and AirTouch/U S West were pairing off toward the end of 1994, GTE Corp. announced it would spend $224 million to purchase the remaining shares of Contel Cellular Inc. it didn’t already own and merge Contel into its GTE Mobilnet operations.

The happy union of all these cellular siblings is said to be driven by the need for economies of scale and common service branding in the new age of wireless competition. But companies with some of the strongest branding power, namely MCI Communications Corp. and Time Warner Inc., are indicating it’s better to resell than to own the infrastructure.

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