WASHINGTON-The Federal Communications Commission late Friday approved the transfer of GTE Corp.’s communications licenses to Bell Atlantic Corp. contingent on 25 conditions, including putting some wireless properties into a trust until they can be sold so as to not violate cellular cross-ownership rules.
“There will be those that will claim this merger brings us closer to a re-emergence of Ma Bell, however, my support is predicated on the applicants’ enforceable commitments to open its traditional local markets to competitors, invest in new markets and accelerate deployment of broadband technologies. The end result should produce more competition, not less,” said FCC Chairman William Kennard.
“This is a great day for Bell Atlantic and GTE, for our customers, our investors and our employees … This final approval contains reasonable conditions that clear the way to unite these two great companies into Verizon Communications,” said Charles R. Lee, chairman and chief executive officer of GTE and designated chairman and co-CEO of the new company.
The merger is expected to close by June 30.
Bringing GTE’s wireless holdings into Verizon Wireless-the mobile-phone company consisting of Bell Atlantic Mobile, PrimeCo and Vodafone AirTouch plc-would create the nation’s largest wireless company, with more than 24 million customers and a footprint covering 90 percent of the United States.
“Our ability to deliver a full plate of voice, data, Internet and wireless services to all our customers will make Verizon the next great brand in communications,” said Ivan Seidenberg, chairman and CEO of Bell Atlantic and designated president and co-CEO of Verizon.
Bell Atlantic and GTE obtained Department of Justice approval after selling off overlapping wireless properties. Some of the sales were made in a multiproperty deal with Alltel Corp., which was approved by the FCC’s Wireless Telecommunications Bureau last week.
One of the major conditions on the transfer involves GTE’s Internet backbone, operation of which would violate the Telecommunications Act of 1996.
To get around the telecom act’s prohibition against regional Bell operating companies offering long-distance services, Bell Atlantic and GTE proposed, and the FCC accepted, spinning off the Internet backbone into a new entity called Genuity.
Verizon would have a 9.5 percent interest in Genuity until Verizon is granted long-distance authority in the former Bell Atlantic states. Bell Atlantic has received such authority in New York but still has 12 states and the District of Columbia to go. Once approval has been obtained, Verizon would then be permitted to control up to 80 percent of Genuity. If approval is not granted for at least 50 percent of the old Bell Atlantic territory within five years, the conversion to 80-percent stock would evaporate.
Seidenberg said he expects long-distance approval within two years from the close of the merger.
This arrangement satisfied FCC Commissioner Susan Ness, who said approving the merger was “a close call.”
Both Republican members of the commission partially dissented in the approval because of the conditions placed on it.
“None of the shortcomings I address here or in my previous statement on these issues will ever be addressed unless the commission begins to reform the majority’s `balancing approach’ to merger review that we apply again here, or seriously question the aforementioned specious theories of potential harm,” said FCC Commissioner Michael Powell.
FCC Commissioner Harold Furchtgott-Roth also dissented because he does not believe the commission should be involved in regulating undersea cable licenses. This is one of the approvals the FCC granted.
Amid concerns that someone might challenge the license transfers, the companies said they believe the approval with conditions can withstand any court challenge.
“We think this arrangement is bullet proof. We believe we have the best lawyers and best consultants that one could have … We don’t think there is a minuscule chance that this would be overturned,” said Lee.
Fate of WorldCom/Sprint
Internet issues also may derail WorldCom Inc.’s hopes of marrying Sprint Corp. and gaining control of Sprint PCS.
Sprint Chairman William Esrey told shareholders last week at the company’s annual meeting in Westwood, Kan., that some Justice Department staff do not support the merger.
“We have had a number of high-level meetings with [DOJ] officials in recent weeks, but it remains unclear if we will or will not get the necessary government clearances to implement the merger,” Esrey said.
WorldCom needs the merger to fill in the large wireless gap in its offerings. Sprint needs to expand its international reach. Both companies would benefit from combining their fixed-wireless assets.
While DOJ seems concerned with the antitrust implications of a merger between the nation’s No. 2 and No. 3 long-distance companies, the European Commission is concerned about WorldCom’s dominance of the Internet. Experts believe WorldCom is willing to sell off Sprint’s Internet backbone but not its stake in UUNet.
Similar concerns when WorldCom bought MCI Communications Corp. led to the sale of some of WorldCom’s assets to Cable and Wireless plc. This sale was not successful and experts believe the EC does not want to create a repeat situation.
The EC is scheduled to make a decision by July 12.
Should WorldCom/Sprint convince DOJ and EC officials that the merger would create an all-distance company in an all-distance telecommunications market, the company still must receive FCC approval to transfer its licenses.
Portions of this story were taken from other news outlets.
