AirTouch Communications Inc. and U S West Inc. announced they will begin combining their domestic cellular operations Nov. 1, initially by using the same support services. The companies will continue to remain separately owned, however, because of federal restrictions.
The companies’ Wireless Management Co., formed to serve as a single management resource, will begin providing support services to both AirTouch and U S West’s domestic cellular operations. This is the first phase of the companies’ joint venture agreement announced about one year ago.
The initial phase follows the completion of contractual agreements between the two partners, regulatory approvals and U S West’s exchange of its San Diego cellular property for several GTE Mobilnet cellular properties, including the license for Portland, Ore.
The second phase will merge the companies’ domestic cellular operations into the WMC under joint ownership. This transaction is expected to take place on July 25, 1998, or when the regulations imposed by the Modification of Final Judgment on U S West in connection with the breakup of the Bell system are lifted, or at AirTouch’s option. AirTouch spun off wireless operations from parent Pacific Telesis early in 1994, releasing it from MFJ restrictions. U S West, however, still must abide by MFJ rules.
“We hope Congress provides legislative relief this year so that AirTouch, U S West and our customers can fully realize the benefits of scale and scope from merging our operations,” said Lee Cox, president and chief executive officer of the joint venture.
The companies announced their decision to merge on July 25, 1994, citing economies of scale as the driving force. The joint venture will enable the new cellular operation to better compete with larger telecom players like AT&T Corp., Sprint Corp. and MCI Communications Corp., all of which can access local telephone services using wireless technology. AirTouch and U S West operate in 16 of the nation’s top 30 markets.
When the second phase of the merger is completed, AirTouch will own a 70 percent stake in the combined cellular properties, while U S West will take a 30 percent share. In the future, U S West has the option to exchange its interest in the WMC for an equity interest in AirTouch that would permit it to be represented on AirTouch’s board of directors.
