NEW YORK-Bell Atlantic Corp. confirmed in a Securities and Exchange Commission filing Sept. 13 its engagement in discussions to forge a mobile telephony alliance with Vodafone AirTouch plc.
Bell Atlantic at first refused to comment on this possibility when the British carrier acknowledged the negotiations five days earlier.
Also last Monday, Vodafone AirTouch said one possible scenario, when and if a joint venture is formed, would be a spinoff of its wireless business in an initial public offering. That entity would have a market valuation of $70 billion to $80 billion, analysts said.
Long before negotiations with Vodafone made headlines, Bell Atlantic had often said it continued to review a possible IPO spinoff of its wireless business, Bell Atlantic Mobile.
In acknowledging their negotiations, both carriers have said a successful conclusion is far from certain. Nevertheless, there was speculation the two companies would announce a joint venture early last week. However, no announcement was forthcoming at press time, midday Friday.
Their lack of nationwide wireless networks places both Vodafone and Bell Atlantic at a competitive disadvantage to rivals like Sprint PCS, AT&T Corp. and Nextel Communications Inc. Besides saving each company the cost of building a national network or buying other carriers, the partnership also would allow them to avoid roaming charges when their customers make calls on outside networks.
In addition, an alliance between Vodafone AirTouch and Bell Atlantic would bolster both in competing with SBC Communications Inc., which agreed in January to purchase Comcast Cellular Communications Inc.
Vodafone AirTouch said it is discussing joining its network in Western states with Bell Atlantic’s network, which covers 24 states in the East.
“Both use cdmaOne technology (in the United States) and have already split up their interests in a previous joint venture known as PCS PrimeCo,” said Jeffrey L. Hines, senior wireless analyst for Deutsche Banc Alex. Brown, New York.
“If the two are not able to work out a joint venture for the U.S. properties, it would appear that Vodafone may be quickly running out of options (for) piecing together a U.S. footprint.”
Jonathan Marshall, director of media relations for Vodafone AirTouch, said an alliance with Bell Atlantic is the British carrier’s first choice.
“We are considering other options, including buying other operators in markets to fill out our footprint or purchasing spectrum from bankrupt carriers,” Marshall said.
Hines said Vodafone AirTouch needs to move quickly to “fish or cut bait” regarding its negotiations with Bell Atlantic, because those alternatives are not likely to be on the table for a protracted time period.
“Either it’s a question of the Bell Atlantic deal working or a bid for Omnipoint or a bid for some of the other licenses,” said Fanos Hira, a telecommunications analyst for Morgan Stanley Dean Witter.
Omnipoint Communications Services, which recently merged with VoiceStream Wireless, uses Global System for Mobile communications technology, not the cdmaOne technology deployed by Vodafone AirTouch’s domestic networks. However, outside the United States, Vodafone is a GSM carrier.
With its acquisition of San Francisco-based AirTouch Communications Inc., Vodafone added about 9 million American customers to its 6 million wireless subscribers in the United Kingdom.
Buying carriers or buying radio-frequency licenses and building out new networks are more expensive options than a joint venture with Bell Atlantic. The British carrier, headquartered in Newbury, Berkshire, also filed a shelf registration with the Securities and Exchange Commission Sept. 7 for up to $8 billion in debt, common and preferred stock and warrants. Net proceeds will be used for general corporate purposes, which may include working capital and debt payments, according to the filing.
Outbidding New York-based Bell Atlantic, Vodafone paid $62 billion to purchase AirTouch in a merger completed June 30. Since beating out Bell Atlantic for AirTouch, Vodafone has stated publicly it would be interested in a national partnership with the former Baby Bell.
