CDMA markets for sale

In order to comply with a consent decree issued by the Department of Justice, Bell Atlantic must sell off wireless properties in 96 markets - a number that represents more networks than many wireless operators own.

The decree is a stipulation for the DOJ's approval of Bell Atlantic's mergers with GTE and Vodafone AirTouch and requires Bell Atlantic to sell wireless properties in markets where any of those three companies, plus PrimeCo Personal Communications, overlap. PrimeCo was owned jointly by Vodafone AirTouch and Bell Atlantic and recently was divided between the owners.

In total, the overlapping markets account for more than

3 million subscribers and 49 million pops. The new Bell Atlantic, which will end up selling about half of those subscribers and pops, still will be larger than any other wireless operator in the U.S., serving more than 21 million customers and covering more than 90% of the U.S. population.

The decisions about which property to sell in each market, however, may be difficult. "We've been working diligently since the deal was announced," said a Bell Atlantic spokesman. "Our teams started looking at the properties and what we might keep or sell or swap."

Two factors Bell Atlantic will look at are tax issues and footprint. "Our business is to try to expand our footprint by swapping, as opposed to just selling the assets outright," the spokesman said. In a swapping scenario, though, Bell Atlantic would have to consider which carrier would then become a competitor in that market.

Bell Atlantic also will likely base its decisions on the types of licenses in each market and how the geographic areas that those licenses cover fit with contiguous markets. Other issues come into play as well, especially considering the decision between PCS and cellular properties.

"The toss up is between do you want an embedded customer base and a wider area of coverage or do you want a new state-of-the-art, no-legacy system," said Sharon Armbrust, senior analyst for Paul Kagan and Associates. In Chicago, for example, GTE recently bought Ameritech's wireless business, which will compete with PrimeCo properties. While the Ameritech network probably has more customers than PrimeCo's, Bell Atlantic also will consider Ameritech's legacy systems and it's geographic footprint.

Bell Atlantic also will base decisions on current ownerships. Some properties may not be majority owned by any of the companies. In San Francisco, for example, Vodafone AirTouch owns 47% and AT&T Wireless the remainder of a wireless business marketed under the Cellular One brand. "For some of the joint ventures, it's a no brainer," Armbrust said. In that scenario, Bell Atlantic would likely sell Vodafone AirTouch's stake in that business to AT&T Wireless.

While it might be in Bell Atlantic's interest to offload the markets to just one buyer, most agree that's unlikely. "It would be hard for any existing operator to buy them all," Armbrust said. The markets are scattered and wouldn't fit any operator's footprint perfectly.

"If they sell them piecemeal, they'll get less money," said Andrew Cole, vice president for Renaissance Worldwide. Operators such as BellSouth or SBC Communications might be interested in the markets, even though the networks use the CDMA air interface, he said.

Although it would make sense for U.S. service providers to buy the properties, Cole suspects that some European players looking for an entrance into the U.S. market could be interested in buying the properties. Many European operators already have been watching Vodafone AirTouch closely. "They feel vulnerable because Vodafone AirTouch has a global presence," Cole said.

Regardless of the buyer, Bell Atlantic has some time to complete all sales. In markets where the overlap consists of two cellular businesses, Bell Atlantic has until the close of the deal with the operator that owns the cellular business to contract for the sale of a property. If the overlap is with a cellular and a PCS business, Bell Atlantic has until June 30, 2000 - or until the closing of the transaction - whichever comes later. The DOJ also will allow for two 30-day extensions in the cellular-to-PCS scenario.