Internet: Mergers & Acquisitions Student Paper: Kerner - California Western
Internet: Mergers & Acquisitions Student Paper: Kerner

California Western -- Telecom - Student Papers

Bell Atlantic, Nynex To Merge In Wake Of Telecommunications Act

by Thomas W. Kerner

     This past April, Bell Atlantic and Nynex agreed to a merger that would create the nation's second largest telecommunications company.  The merger follows in the wake of the passage of the Telecommunications Act of 1996, which freed local and long-distance telephone companies, cable operators and others to provide a variety of services, including cable, Internet and wireless.

     The deal is expected to be completed by next April.  Still to be resolved are issues concerning poor service and accusations of excessive local telephone rates in Nynex service areas.  Several state planning commissions have said that they would withhold approval of the deal until Nynex improves customer service.  In addition, Bell Atlantic faces a $500 million discrimination suit.

     Once completed, the merger will create a company with combined revenues of more than $79.6 billion.  AT&T will remain the nation's largest telecommunications provider, with revenue of $47.28 billion.  The new company will service an area stretching from Maine to Virginia.  The area bills more than one-fourth of the nation's long-distance phone calls, roughly $20.5 billion annually.              The companies have already combined their wireless operations and plan to blanket major eastern cities in a wireless cable television venture. 

     Opponents worry that the merger represents a reforming of the Bell monopoly.  But other companies have been quick to take advantage of the new law.  Southwest Bell (SBC), which has also announced a merger with Pacific Telesis Group, has already filed to provide long-distance service in 11 states plus Washington, DC.  These areas fall within the Bell Atlantic-Nynex territory.  Already the market leader in cellular services, SBC has set up its Cellular One operations in New York, Boston, Baltimore and Washington, DC.

     For its part, Bell Atlantic was the first of the baby Bells to file to provide out-of-region long distance service, applying in Texas, Florida, Illinois, North Carolina and South Carolina, with plans to expand into 15 other states.  It hopes that the merger with Nynex will give it the financial backing to allow it to resell long-distance service in those areas immediately.

     Nynex and Bell Atlantic have also spent $100 million for warrants to purchase up to 45% of a wireless cable company, CAI wireless.  CAI could give the new company access to 11 million homes on the East Coast, including New York and Philadelphia.  The company could be providing digital wireless cable services in those areas by the end of the year.

     The new company will most likely be called Bell Atlantic, but  will operate out of the existing Nynex main office in New York.