THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, April 23, 1996 TAG: 9604230335
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: STAFF AND WIRE REPORT
LENGTH: Long : 192 lines
Opposition rose immediately Monday to the $23 billion merger of Bell Atlantic Corp. and Nynex Corp.
No sooner had the deal been announced than competitors were questioning if new monopolies are being formed at a time when deregulation is supposed to encourage competition. Unions and some shareholders also questioned the deal.
The top executives of Bell Atlantic and Nynex took on the critics eagerly, saying the deal would benefit customers and employees.
The merger would unite Bell Atlantic with Nynex, the biggest phone company in the Northeast, and create a service area with 26 million customers.
Bell Atlantic, the largest local phone company in Virginia, has 2.5 million customers statewide and employs 9,900 people in Virginia, including nearly 2,000 in Hampton Roads.
While the new Bell Atlantic will be a telecommunications force, regulatory approvals could slow by as much as a year its entry into lucrative markets, such as the $9 billion-a-year long-distance market in its region. At the same time, state and other federal approvals could grind on for as long as 15 months. Critics raise concerns
Some consumer advocacy groups contended the deal violated the spirit of the telecommunications deregulation law passed two months ago.
``The public was told the new law would lead to new entrants in every market and instead we are seeing the same old monopolies banding together to prevent competition from developing,'' said Bradley Stillman, telecommunications policy director at the Consumer Federation of America.
Also weighing in to cast a cloud over the deal were heavyweights AT&T Corp. and MCI Communications Corp. It was MCI's entry into the industry that led to the 1980s breakup of the Bell system that created seven Baby Bell phone systems from AT&T.
MCI and AT&T called the Bell Atlantic-Nynex merger anti-competitive and urged regulators to ``examine these proposed deals thoroughly.''
Bell Atlantic Chairman Ray Smith, who also would be chairman of the merged company, said he welcomed AT&T's and MCI's concern, because he considers it evidence that the merged entity will be a competitive force. ``It's the best thing they could have done for us,'' he said.
Despite the big merger, the remaining three Baby Bells - Ameritech Corp. of Chicago, BellSouth Corp. of Atlanta and U S West Inc. of Denver - insist they plan to go it alone, at least for now.
``Very few acquisitions or mergers have been successful in the last 10 years,'' says Richard Notebaert, chairman and chief executive of Ameritech, which serves a five-state region in the Midwest. He argues that being bigger could pose significant disadvantages, perhaps producing ``a defused focus'' and ``slower cycle time'' for introducing new products.
Nonetheless, Bell Atlantic and Nynex fully expect to achieve some economies. The phone companies said the merger will result in 3,000 job cuts out of a combined current employment of 133,000.
Those layoffs would be in addition to about 4,000 jobs Nynex has yet to cut from a restructuring that began in 1994 and was aimed at eliminating nearly 17,000 of 76,000 jobs. Bell Atlantic has largely completed cutting 5,600 jobs, a process that began in 1994.
The Communications Workers of America said the deal should not be approved by regulators and shareholders if it results in bigger layoffs than have been projected.
Rather than reduce jobs, the merger will create opportunities, said Bell Atlantic's Smith.
``If you look at this new territory, 45 percent of all the toll calls that used to be MCI, AT&T or Sprint, begin or end in the new Bell Atlantic territory,'' Smith said. ``We're going to enter that market and we're going to be extremely well and that means jobs.'' Impact on Hampton Roads
``I'm holding my breath on that because mergers have never proved well for the workers in any company,'' said Michael D. Upton, president of CWA Local 2202, which represents more than 1,200 of Bell Atlantic's Hampton Roads employees. ``We're just taking a wait-and-see attitude toward what's happening.''
Bell Atlantic has already been downsizing aggressively through attrition. ``We're at a bare-bones minimum,'' Upton said. ``We don't have enough folks to do the job today.''
Bell Atlantic said not much of an impact on its nearly 2,000 employees in Hampton Roads is expected, at least not right away.
Although half of the projected 3,000 job cuts from the merger will come from Bell Atlantic'a ranks, most of those cuts will be in management and administrative jobs, which are concentrated in Philadelphia and Arlington, said Paul Miller, a spokesman for Bell Atlantic-Virginia.
Richmond, the headquarters of Bell Atlantic-Virginia, is also more likely to feel job losses than Hampton Roads.
For Bell Atlantic's Hampton Roads customers, the changes will be positive but minimal, Miller said.
The company may move toward a ``faster deployment of some services,'' as a result of the merger, he said.
In Hampton Roads, Bell Atlantic and Nynex are part of consortiums that plan to introduce more than 100 channels of wireless cable TV late this year, and a wireless phone service early next year. Bell Atlantic is also planning to offer Internet access services in Hampton Roads in the fall.
Miller said some Hampton Roads businesses with operations in Nynex territory may benefit from the merger by being better able to consolidate their purchases of phone services from one provider.
But the merger can't be good for consumers, said Franklin R. Bowers, Hampton Roads general manager for Cox Communications Inc., which has been snapping up cable-TV systems in Hampton Roads to gird for an all-out fight with Bell Atlantic for phone and cable customers.
``The resources they'll have are staggering,'' Bowers said, ``and that makes them all the more formidable as competitors. I don't see how this is good for consumers when you're talking about a huge company getting even larger.''
He's hoping this doesn't slow down Cox's negotiations with Bell Atlantic to get access to the local phone market. ``There's only so many lawyers to go around,'' he said.' Structuring the deal
Shareholders of each Baby Bell will swap their shares for stock in a new company. Bell Atlantic holders will receive 1.302 shares in the new company for each Bell Atlantic share. Nynex holders will receive one share for each Nynex share.
Based on the price paid for Nynex stock, the merger would be the second largest in U.S. history after the $26.4 billion buyout of RJR Nabisco Corp. by Kohlberg Kravis Roberts & Co. in 1989.
Bell Atlantic shareholders will receive the equivalent of a 6.7 percent increase in their cash dividend after the merger.
That's because even though the per-share dividend is going down to $2.36 from the current $2.88 for Bell Atlantic shareholders, they will be getting the 1.302 shares of stock in the new company for every share they now own.
The deal upset some Nynex shareholders. Nynex shareholders had been hoping for a premium of between 5 percent and 10 percent above the market price of $53 on Friday. Instead, the transaction values their shares at about $50 each, a 6 percent discount.
Bell Atlantic closed Monday at 67 1/8, up 2 1/8 from Friday. Nynex was down 2 5/8 to 50 3/8. MEMO: This article was compiled from reports by staff writer Dave Mayfield,
The Associated Press, Bloomberg Business News and The Wall Street
Journal.
HOW THE MERGER PLAYS IN HAMPTON ROADS
The company says:
Not much impact expected initially for Bell Atlantic's nearly 2,000
local employees. Most job cuts will come from elsewhere in the company.
Changes should be positive for customers. The company may move toward
``faster deployment of some services.''
The competition says:
Merger won't be good for consumers. ``The resources they'll have is
staggering,'' says Franklin R. Bowers, Hampton Roads general manager for
Cox Communications Inc., ``and that makes them all the more formidable
as competitors. I don't see how this is good for consumers when you're
talking about a huge company getting even larger.''
The union says:
Plans to keep an eye on job cuts, which it is unconvinced will be
limited to the company's management and administrative ranks. ``I'm
holding my breath on that because mergers have never proved well for the
workers in any company. We're just taking a wait-and-see attitude toward
what's happening,'' said Michael D. Upton, president of Communications
Workers of America Local 2202, which represents more than 1,200 of Bell
Atlantic's Hampton Roads employees.
ILLUSTRATION: Graphic by KEN WRIGHT, The Virginian-Pilot
BELL ATLANTIC / NYNEX MERGER
Bell Atlantic Corp. and Nynex Corp. announced merger plans
Monday, creating a combined company that stretches from Virginia to
Maine. Here's what each company brings to the deal:
Nynex Corp.
Headquarters - New York.
Service Territory - Maine, Massachusetts, New Hampshire, New
York, Rhode Island, Vermont and one community in Connecticut.
Earnings in 1995 - $1.4 billion, not counting accounting,
restructuring and other unusual charges.
Revenue in 1995 - $13.1 billion.
Number of employees - 65,800.
Number of phone lines - 17.1 million.
Bell Atlantic Corp.
Headquarters - Philadelphia.
Service territory - Delaware, Maryland, New Jersey, Pennsylvania,
Virginia, West Virginia and Washington, D.C.
Earnings in 1995 - $1.86 billion.
Revenue in 1995 - $13.4 billion.
Number of employees - 67,000.
Number of phone lines - 20 million.
Joint Operations
Bell Atlantic Nynex Mobile, a cellular phone operation.
Operating income in 1995 - $406.1 million.
Revenue in 1995 - $1.66 billion.
Number of subscribers - 3.6 million.
Source: AP by CNB