US West, AirTouch Plan Cellular Merger

THE JOURNAL RECORD, July 26, 1994 | Go to article overview

US West, AirTouch Plan Cellular Merger


NEW YORK (AP) _ US West Inc. and AirTouch Communications Inc. will form a wireless blanket over the western half of the country by combining their cellular phone operations in a deal valued at $17 billion.

The combination announced Monday is the third major merger in the cellular phone business in a year. It's also a sign of the likelihood that a few companies eventually will dominate that industry, the way that AT T, MCI and Sprint have evolved to reign over long-distance telephone calling.

"What we're really seeing now is the cellular business moving itself into blocks," said Mark Lowenstein, cellular analyst at the Yankee Group, a Boston research firm. "It's a rejection of the fragmentation that's existed to date."

The cellular business, when it was created a decade ago, was designed so there would be two carriers in every market _ the local phone company's wireless subsidiary and another firm. But that tended to restrict them to regional service despite demand, particularly among business customers, for nationwide coverage.

"If you're going to create that for customers, you've got to keep expanding your footprint," said Sam Ginn, chairman and chief executive of AirTouch, which until April was the cellular arm of Pacific Telesis Group.

AT T's acquisition of McCaw Cellular Communications Inc., announced last August and now nearing completion, was the first signal of the industry's broad change. Last month, Bell Atlantic Corp. and Nynex Corp. said they would combine cellular businesses, coverage that includes the crowded corridor from Boston to Washington.

The combined US West-AirTouch operation will cover most states west of the Mississippi River as well as the Atlanta area and some cities in Michigan and Ohio.

It will serve 16 of the nation's top 30 markets including Los Angeles, Detroit, Dallas and San Francisco and be available to 53 million potential subscribers. AirTouch now has about 1.1 million subscribers and U S West has 624,000.

AirTouch initially will own 70 percent of the venture while US West will own 30 percent. Based on AirTouch's current market value of around $12 billion, which includes international operations that are not part of the deal, the joint venture with US West is worth about $17 billion.

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