GTE Corp. last week announced plans to purchase 20 Ameritech Corp. wireless properties in the Midwest, ending months of speculation about who would acquire the lucrative Chicago and St. Louis markets that became available when SBC Communications Inc. and Ameritech announced their merger last year.
SBC and Ameritech had to divest several wireless markets because the two companies overlapped in Illinois, Indiana and Missouri, exceeding Federal Communications Commission spectrum cap rules. The Ameritech properties dovetail with GTE’s wireless markets, and both companies have chosen Code Division Multiple Access technology for their digital deployments.
GTE will pay $3.27 billion cash for the properties, which cover 1.7 million subscribers and more than 12.9 million total pops, said the company. The transaction represents about half of Ameritech’s wireless subscribers.
Investment company Georgetown Partners will hold a minority equity interest in the properties.
Bill Kula, a spokesman for GTE, said the transaction will have no immediate effect on the transaction price of the company’s pending merger with Bell Atlantic Corp.
The wireless properties initially will be managed as a stand-alone subsidiary owned 93 percent by GTE and 7 percent by Davenport Cellular Communications L.L.C., which is a wholly owned company of Georgetown Partners. Chester Davenport, chairman of Georgetown Partners and Davenport Cellular, will be chairman of the subsidiary, which will report to Mark Feighner, president of GTE Wireless.
Davenport Cellular, in addition to its financial investment in the properties, will provide marketing services designed to bolster demand for wireless products and services in underserved ethnic markets.
Upon completion of the GTE/Bell Atlantic merger, the properties will be integrated into the combined company’s wireless business.
Once pending transactions are complete, the Bell Atlantic-GTE union will give Bell Atlantic a leading position among cellular carriers, with nearly 13 million subscribers, followed by AT&T Wireless Services Inc. and SBC Wireless Inc. with nearly 10 million subscribers each, and AirTouch Communications Inc. with 7.9 million subscribers.
Folding Ameritech’s Chicago market into the combined Bell Atlantic/GTE, however, will cause yet another wrinkle. Personal communications services carrier PrimeCo Personal Communications L.P., which is owned by AirTouch and Bell Atlantic, also operates in Chicago, leaving Bell Atlantic over the spectrum cap there. The combined Bell Atlantic/GTE also would exceed spectrum cap rules in Houston and Tampa, Fla., because of the overlap between GTE and PrimeCo.
Chris Larsen, senior wireless analyst at Prudential Securities Inc., said Bell Atlantic and AirTouch might end up dividing PrimeCo in order to deal with the overlaps, with at least Tampa, Houston and Chicago going to AirTouch.
The transaction, which is contingent upon the close of the SBC/Ameritech merger, has been approved by the boards of GTE, Ameritech and Georgetown partners. Bell Atlantic has agreed to support the transaction, which is expected to closed by mid-year.
