THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, December 19, 1995 TAG: 9512190243
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY EVAN RAMSTAD, ASSOCIATED PRESS
DATELINE: NEW YORK LENGTH: Long : 103 lines
The possible merger of Bell Atlantic Corp. and Nynex Corp. may be the first in a huge wave of buyouts among phone, cable and other technology companies after Congress changes telecommunications laws.
It highlights an outcome of the telecommunications reform effort that is rarely discussed by lawmakers or industry executives.
Though industry observers were little surprised by Monday's report in The Wall Street Journal that Bell Atlantic and Nynex are discussing a merger, for many people it was a new sign of the big changes ahead for phones, TVs, pagers and e-mail.
``It just brings up more potential combinations,'' said George Reed-Dellinger, analyst at HSBC Washington Analysis, a research arm of the Hong Kong-Shanghai Bank Group. ``You've got about eight industries separated by law, not by technology.''
The bill, now in the final days of compromise in a House-Senate conference committee, is designed to wipe out the legal barriers between local phone, long-distance, cable and wireless companies.
It would force companies to act to hold off competitors they haven't faced and jump into markets they couldn't previously enter.
For Bell Atlantic and Nynex that means fighting companies like AT&T Corp. and Time Warner Cable, when they offer local phone service, and then creating long-distance and video services themselves.
Consumer advocacy groups oppose the bill because they fear industry consolidation. The Bell Atlantic and Nynex dealings are a sign of what's ahead, one opponent says.
``It just shows that people who are criticizing consumer advocates' concerns about bigger monopolies are out of line with what the industry plans,'' said Bradley Stillman, director of telecommunications policy at the Consumer Federation of America. ``The risks in the form of higher rates and ultimately less choice are great.''
Telecommunications firms publicly say that they need barriers eliminated and markets opened to best take advantage of digital technology, which holds the promise of more flexible service and devices. They also say customers, particularly businesses with offices in many states, want one-stop communication providers.
But privately, executives say the changes will set off a nerve-wracking scramble. The leaders of the regional Bell operating carriers, bound by their work in the Bell System before AT&T's 1984 breakup, are widely believed to hold frequent discussions about strategies and mergers.
Neither Bell Atlantic nor Nynex would publicly confirm their talks. But representatives of the companies noted alliances are being considered throughout the telecommunications industry.
The Journal, citing people close to the companies, said eventually Pacific Telesis Group, which serves California and Nevada, might be pulled into the Bell Atlantic-Nynex deal.
Bell Atlantic and Nynex managers have spent weeks studying how to structure a deal, the paper said. An executive at another Bell company, cited anonymously by the Journal, said a merger of those firms is considered ``a done deal'' in some parts of the industry.
Analysts view the companies as natural partners because they use similar networking equipment and share the so-called ``Northeast Corridor'' from Boston to Washington that holds about one-fourth of the nation's households.
In addition, Bell Atlantic and Nynex combined their cellular operations earlier this year. The two companies and two other big phone companies, U S West and AirTouch Communications, are also partners in another wireless technology called Personal Communications Services. The companies' PCS networks, similar to cellular, are scheduled to begin operation in Hampton Roads and 15 other major U.S. markets by early 1997.
Still another Bell Atlantic-Nynex partnership involves the companies' video-services plans. They, along with Pacific Telesis, have formed a company called Tele-TV to eventually deliver interactive TV through phone lines. And Bell Atlantic and Nynex have a joint investment in a so-called wireless-cable operator called CAI Wireless Systems Inc., which uses microwaves to deliver multichannel TV services in Hampton Roads and other several other major East Coast markets.
Besides fighting new competitors jointly, a full-fledged Bell Atlantic-Nynex merger would let the companies cut costs in data processing, billing and other common operations.
``They are the same arguments that push banks to buy other banks,'' said Howard Anderson, president of the Yankee Group, a technology research and investment firm in Boston.
``What we're seeing is a new integrated carrier develop as a single shop for a brand of service,'' he added. ``A customer might want to get local service, wireless service and long distance from one place and the carrier would offer added discounts for each.''
The merged Bell Atlantic and Nynex would have more than $27 billion in annual revenue and $3 billion in profit, making it second to AT&T in U.S. telecommunications. Combined, the two companies would have about 140,000 employees, including 1,750 Bell Atlantic employees in Hampton Roads.
Bell Atlantic's stock closed down $1.75 a share to $66.87 1/2 and Nynex was up 25 cents to $49.87 1/2 in trading on the New York Stock Exchange. MEMO: Staff writer Dave Mayfield contributed to this report.
ILLUSTRATION: BELL ATLANTIC, NYNEX DISCUSS MERGER
Graphic
The Virginian-Pilot
SOURCE: Associated Press
[For a copy of the graphic, see microfilm for this date.]
KEYWORDS: MERGER TELECOMMUNICATION TELEPHONE by CNB