Bell Atlantic linked to $45bn takeover

BELL ATLANTIC, the largest American local phone company, is in $45bn takeover talks with AirTouch, the world's biggest cellular phone company, according to a report on the American TV network CNBC that cited "people close to the talks".

The report said that an all-share deal could be announced early next week. It would be the eighth-largest acquisition ever, and just the latest manifestation of the merger frenzy in the American telecommunications sector which has seen a raft of megadeals in the past six months alone.

AirTouch has been linked in the past with Britain's Vodaphone and MCI Worldcom. Airtouch's chief executive officer Sam Ginn has said repeatedly in interviews in the US press that the company - which has been aggressively expanding in Europe - would be open to takeover offers. According to the latest reports, Bell Atlantic would offer AirTouch shareholders a premium of less than 10 per cent on the current share price. AirTouch's shares jumped $31/6 to $727/16 on Wall Street on Thursday before the market closed for the New Year's holiday. Bell's shares fell 31/2 to $56.

Neither Bell Atlantic nor AirTouch have been prepared to comment on the reports. They were not returning calls yesterday.

However, analysts said the deal would make a great deal of sense, providing it could clear potential regulatory hurdles.

The American authorities are still scrutinising the $52bn merger unveiled between Bell Atlantic and GTE, the long-distance phone operator, in July. Bell Atlantic and AirTouch already have links through PrimeCo, a paging and personal communication joint venture which operates in more than 30 American cities. The pair also have a joint equipment purchasing arrangement in the US and use the same mobile phone technology.

US regulators may force Bell Atlantic to sell some of its existing cellular activities as the price of getting the merger through.

Acquiring Airtouch would put Bell Atlantic on a much better footing to compete with AT&T which leads the US cellular market as well as giving it a strong position of overseas markets which account for half Airtouch's cashflow.

Airtouch boasts 16 million subscribers world-wide, up 35 per cent on a year ago. It added more than one million new customers in the third quarter.

Demand for cellular telephony is growing far faster than the fixed line market.

However, most of the growth is now coming overseas. The company has operations in 12 other countries including Belgium, Italy, Germany, Japan, Poland, Spain, South Korea and Sweden.

"Bell Atlantic would be getting AirTouch at a good price," said one analyst yesterday, adding that the market had consistently failed to grasp the fall value of AirTouch's overseas operations.

The news of the talks suggests that the merger activity in the US telecoms sector, already at record levels last year, will not abate in 1999.

The past few months have seen the announcement of a $62bn merger between SBC Communications and Ameri-tech, the $48bn acquisition of cable group TCI by AT&T, and the $1bn international joint venture between British Telecom and AT&T. The deal followed the collapse of BT's earlier plans for a merger with MCI, the second-largest US international carrier.