NEW YORK-Two months into Bell Atlantic Corp.’s completed acquisition of Nynex Corp., company executives told the investment community they expect greater savings and higher earnings growth than originally envisioned for the merged company.
“Unlike dilutive mergers, this was an accretive merger, and we expect double-digit increases on a larger base,” said Raymond W. Smith, chairman and chief executive officer. “We expect sustainable 10 (percent) to 12 percent shareholder growth.”
Cost savings are so significant from the merger that Fred Salerno, chief financial officer, said Bell Atlantic can finance completely from its own internal capital its entry into new businesses, like long-distance telecommunications, and its expansion of marketing and other efforts for its existing services.
“We don’t intend to issue new equity to finance this, and we intend to maintain our `A’ rating with the (debt) rating agencies,” he said.
By 2000, Bell Atlantic expects to realize savings of $1.1 billion, “in our run rate of expenditures, $600 million more than we thought we’d accomplish,” Salerno said.
Smith said Bell Atlantic is looking at “expanding addressable markets of $60 billion,” half of which are in the local telephone and wireless sectors, the other half in long-distance, wireline, data and video services.
Lawrence T. Babbio, Jr., chairman of Bell Atlantic’s Global Wireless Group, said the carrier has about 6 million subscribers, of which about 5 million are in the United States. Its coverage area comprises 173 million proportionate pops worldwide, with revenues of nearly $3 billion.
Bell Atlantic Mobile’s service territory includes the greater New York City metropolitan area, “where competition is intense, as heated as anywhere,” Babbio said. “We’ve been very successful in the third quarter, with subscriber growth of about 25 percent, revenue growth of about 18 percent and revenue per subscriber holding steady at $54,” he said.
Babbio said Bell Atlantic’s control of customer acquisition costs is the best in the industry.
“We have not dramatically cut prices where we didn’t need to,” he said. “You can sell anything if it’s free.”
PrimeCo Personal Communications L.P. “was a little slow to establish its brand, but it has 260,000 customers and will have about 400,000 by year-end,” Babbio said.
Next year, Babbio said Bell Atlantic expects its wireless operations will double its earnings and make “a significant contribution” to the company’s earnings growth. Bell Atlantic Mobile will generate free cash flow next year, and international wireless operations will start generating dividends, Babbio said.
Grupo Iusacell in Mexico has seen its stock price triple to $21 as of Oct. 21 compared with a year earlier, and its growth rate is a phenomenal 50 percent, he said.
Besides Mexico, Bell Atlantic has minority stakes in wireless carriers in the Czech Republic, Greece, Indonesia, Italy, Japan and Slovakia.
“We won’t be running around to every country in the world looking to invest $100 million, but we will make some selective domestic and overseas investments that will enhance our portfolio’s value,” Babbio explained.
