Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, February 25, 1994 TAG: 9402250139
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
In the aftermath Thursday, executives from both companies blamed outside forces, including Wall Street and Washington. But their statements also revealed fundamentally divergent views of the marketplace.
Bell Atlantic was most anxious to start providing communication services outside its six-state East Coast region. TCI wanted to blaze a two-way path to every home for loads of TV shows, movies and games.
The deal's collapse presents a lesson in the trouble of placing a value on products or assets now, when their future importance is hard to know.
It also shows the difficulty of balancing the utility-like regulation of communication companies with a desire for advanced services and technology requiring enormous amounts of money and entrepreneurs willing to take risks.
These troubles likely will be encountered repeatedly as companies try to develop advanced communications services, the so-called "information superhighway."
TCI and Bell Atlantic complained that a cut in cable rates ordered by the Federal Communications Commission on Tuesday sabotaged their deal, which had been valued in a range from $12 billion to $30 billion.
They also blamed a drop in the price of Bell Atlantic's stock, driven down by higher interest rates and a migration of big investors to stocks of other companies prospering in the strengthening economy.
FCC commissioners and members of Congress said the companies overreacted if they ended their merger based on the agency's action.
"These two giant monopolies want to blame someone else for their problems in the marketplace, and the obvious culprit is the government," said Sen. Howard Metzenbaum, D-Ohio, chairman of the Senate Judiciary Committee.
Indeed, the deal had been in trouble for some time. When they first announced the merger Oct. 13, Bell Atlantic and TCI set a Dec. 15 deadline for a definitive agreement. They missed that deadline, set a new one for Jan. 31 and later extended that to Feb. 14.
During that time, Bell Atlantic's stock dropped from $67 to $53 per share and TCI wanted more Bell Atlantic shares committed to the purchase.
The companies said they overcame that issue, though, reaching final terms Monday that were to be presented to their directors Friday and Saturday. But after the FCC's cable price recommendation, Bell Atlantic sought a lower price Wednesday and TCI refused.
"They regarded themselves as paying very top price . . . and we regarded ourselves as getting the absolute minimum compensation," TCI President John Malone said. "There was really no wiggle room on either side."
The collapse hurts Bell Atlantic more than TCI. With TCI, the phone company would have been able to offer communication services out of its region. That would have presented the company many lucrative opportunities quickly, particularly with business customers, on a national scope.
"We're going to find new ways and new opportunities to be aggressive out of region," said Jim Cullen, president of Bell Atlantic. "But, while we're not starting quite from scratch, we're certainly starting fresh."
TCI, with systems that reach 10 million households in virtually every state, will return to its status as the most important company in the cable industry.
Malone, a prolific dealmaker who was unable to pursue other ventures while the Bell Atlantic talks proceeded, said he was eager to return to them.
"For the last five months I've had to not answer phone calls from people I was spending a lot of time with last summer," he said. "Those interests exist. We're now in a position to continue those discussions."
Two other big phone companies, US West and Southwestern Bell, said the trouble between Bell Atlantic and TCI had not soured the relationships they had formed with other cable companies.
by CNB