Updated from 11:49 a.m. EST
said Tuesday that they had agreed to exchange some of their wireless businesses in 13 states, paving the way for the merger of Bell Atlantic's and
U.S. wireless operations.
Department of Justice
ordered Bell Atlantic of New York and Vodafone of Britain to eliminate any overlap in their cellular operations as a prerequisite to completing the merger, which was announced in September and is expected to take place this spring.
"You're not allowed to own two wireless properties in one market; it's anti-competitive," said Brian Wood, a spokesman for Bell Atlantic.
Wood said the deal would remove about one-third of the total overlaps the companies must eliminate, adding that they still existed in the companies' PCS wireless properties.
Under the terms of the deal announced Tuesday, Bell Atlantic and its other merger partner, GTE, which is based in Irving, Texas, will transfer to Alltel their wireless operations in 27 markets across seven states.
In exchange, Alltel will transfer its interests in 42 markets across six states. Alltel, a rural wireless company based in Little Rock, Ark., will also pay about $600 million to Bell Atlantic, GTE and Vodafone.
The transaction is expected to be completed in mid 2000.
The companies also signed a "roaming" agreement that will allow customers' calls to travel across each other's networks at reduced rates. The combined network will cover almost 95% of the U.S. population.
Peter Friedland, an analyst at
who covers Alltel, applauded the announcements in general and the roaming deal in particular, saying it would help Alltel to compete for customers by allowing it to offer more favorable rates to customers calling outside Alltel's regional network.
"This enables Alltel to offer a national one-rate plan at a positive cost structure," said Friedland, who rates Alltel a strong buy and has not done any underwriting for the company.
"This gives Alltel access to Bell Atlantic, GTE and Vodafone's domestic footprint at very favorable rates," he said.
Previously, Alltel customers were charged high rates to make calls outside of Alltel's network.
Alltel's stock price rose on the news, gaining 3 7/8, or 6%, to 70 5/8, while Bell Atlantic slipped 2 3/16, or 3%, to 59 3/4 and GTE fell 3 1/8, or 4%, to 70 1/8. (Alltel closed up 4 1/4, or 6.4%, at 71. Bell Atlantic closed down 2 3/8, or 3.8%, at 59 9/16. GTE closed down 3 1/4, or 4.4%, at 70.)
Marjorie Saint-Aime, an analyst at
, an institutional research and brokerage boutique, said she was surprised by the drops in Bell Atlantic and GTE.
"I find it positive in order to close the Bell Atlantic deal, and $600 million seems about right," said Saint-Aime, who rates both Bell Atlantic and GTE a strong buy. She does not cover Alltel and her firm does not do any underwriting.
As a result of the swaps, the Bell Atlantic, GTE and Vodafone partnership will have 23 million customers and cover a region of 223 million people. Alltel will have a total of 5.8 million wireless customers in areas with a total population of 46 million.
About 700 Bell Atlantic and 1,000 GTE employees will join Alltel and 900 Alltel employees will work for the new Bell Atlantic, GTE And Vodafone venture.