Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, October 14, 1993 TAG: 9310140170
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Knight-Ridder/Tribune
DATELINE: NEW YORK LENGTH: Medium
The mega deal, valued at anywhere between $16 billion and $33 billion depending on how the stock-for-stock transaction is calculated, is one of the largest mergers in financial history. It is the biggest effort to date by one of the Bells to boost market share through the multimedia area.
Bell Atlantic will acquire TCI and Liberty Media Corp., also a cable provider, in two phases. After the merger, Bell Atlantic would have more than 22 million telephone and cable customers in 59 of the top 100 U.S. markets.
Further, by installing Tele-Communications Chief Executive Officer and President John Malone as its vice chairman, Bell Atlantic is "shaking up the complete management of the [telephone] business," as Goldman Sachs and Co. analyst Robert Morris put it.
"This is changing the [perception] of what was a regulated utility in management mindset and getting it to think more like a competitive entity, which is what the cable industry is like," Morris said.
Morris earlier Wednesday recommended to his investor clients that they buy Bell Atlantic stock. As he sees it in this particular case, "the best defense is a strong offense."
Bell Atlantic stock was up 5 7/8 at 65 7/8 in heavy trading on the New York Stock Exchange, while Tele-Communications Inc. class A shares, the most active issue on the Nasdaq, were up 3 at 31].
Morris said he sees Bell Atlantic "branching out geographically and expanding the available market for themselves."
"Within their territory, what they'll do and have talked about doing is expanding or modernizing and migrating their telephone network to look more like a cable TV network. So they'll look more like a cable TV operator and can compete more effectively against" other rivals, such as Southwestern Bell Corp.
Southwestern Bell this year agreed to acquire Hauser Communications Inc. of Washington, D.C., which is part of Bell Atlantic's territory, for $650 million. Analysts said Southwestern's move put Bell Atlantic on the defensive because it could offer Hauser's 200,000 subscribers in that area competitive phone rates.
But Bell Atlantic is gaining 10 million TCI subscribers, analysts pointed out. Hence, Morris' best defense/strong offense analogy.
Bell Atlantic essentially had no choice but to jump on this deal, amid an array of other telephone, cable and media operations sprouting all over the map. Wednesday, BellSouth Corp. detailed plans to buy a 22.5 percent stake in privately held Prime Management, an Austin, Texas, cable operator. Last week Nynex Corp. said it would inject $1.2 billion into Viacom Inc., backing the latter's bid for Paramount Communications Inc.
John Money, analyst at Argus Research, called Bell Atlantic "unrivaled among its peers" in terms of it being a "forward-looking company" focused on competitiveness.
"The question remains: Does it make financial sense to its shareholders? It certainly does operationally. But the jury is still out" in terms of the impact on shareholders, Money said.
One big plus in the deal for Bell Atlantic is its tentative plan to get out of the financial services business, analysts added.
"We never viewed this as a strategic business for them. It was profitable but it wasn't strategic. It had risks that were different from the risks of this industry," Goldman's Morris said.
The Associated Press supplied information for this story.
by CNB