Selling Off Properties Resolves Overlapping Obstacles

With the $61 billion SBC-Ameritech merger and $52 billion Bell Atlantic-GTE merger in full swing, carriers are facing overlapping wireless phone operations. As a result, the carriers are selling off properties to help seal the deal and win regulatory approval.

Last month, Ameritech sold almost half of its wireless phone business to GTE for about $3.3 billion, eliminating the conflict of overlapping operations for SBC and Ameritech. GTE will acquire three important markets in the deal: Chicago, St Louis and central Illinois.

The wireless properties initially will be managed by a stand-alone subsidiary. GTE will own 93% and will be united with Davenport Cellular Communications, a company owned by Georgetown Partners. With no prior telecommunications experience, Georgetown Partners will hold a minority equity interest (7%) in the properties and will provide the GTE subsidiary with marketing services geared toward the high-potential but under-served ethnic markets.

Bell Atlantic and GTE also likely will sell their overlapping wireless phone operations, which occur in several states including Florida, Texas and Virginia. According to Nancy Bavec, GTE spokesperson, the overlap issues are relatively small in number, and the details haven't been worked out at this point.

Several competitors oppose the mergers of Bell Atlantic-GTE and SBC-Ameritech. Current FCC rules prohibit the Baby Bells from selling long-distance service until they can demonstrate that they have opened their local networks to potential competitors. AT&T, MCI WorldCom and Sprint state that the Bells' local markets still aren't fully open to competitors. Bell Atlantic claims their disapproval is a case of "guarding their turf."

The FCC has not made any decisions, and convincing it that these mergers will not result in monopolies is going to be an uphill battle. However, GTE's Bavec is not concerned.

"We're confident that we'll have approval in time to close the merger by the end of this year," she said. "We've anticipated all of the issues that the FCC is looking at, and we've been talking with them about how to resolve all of those issues. So we don't see anything there that's a show-stopper."

If these mergers and others break through regulations and become final, many analysts believe the wireless industry soon will be dominated by only a handful of companies, and a much larger number of smaller companies will specialize in niche services like technology or customer service.