Wireless Carriers Need to Be Big to Survive, Executive Says

Article excerpt

Bell Atlantic Mobile and Vodafone AirTouch PLC had the limelight April 4 after completing their merger. The deal will create the largest U.S. wireless carrier.

One day later SBC Communications Inc. and BellSouth Corp. announced their own merger, a deal creating the nation's second-largest wireless carrier with an estimated 16 million subscribers. AT&T Corp. will be the nation's third-largest wireless company with 12.2 million wireless subscribers.

Patrick J. Devlin, president of the Mid-Atlantic region for the new company formed by the merger of Bell Atlantic and Vodafone, said mergers are continuing in the wireless industry because of the huge investment needed to operate a nationwide wireless carrier.

The merged companies announced plans to invest more than $3 billion this year in upgrading and expanding their national wireless network to increase capacity and add new services.

Bell Atlantic also plans to complete a $90 billion purchase of GTE Corp. this quarter. That combination of three companies will have about 24 million wireless subscribers, with a likely 28 million subscribers by the end of 2000.

Bell Atlantic and Vodafone agreed to combine their U.S. wireless properties last September.

After completion of the Bell Atlantic-GTE merger, Bell Atlantic will own 55 percent of the new company - introduced April 4 as Verizon Wireless - and Vodafone will own 45 percent of the New York City-based company.

The new company already has plans to go public.

The name - pronounced ver-EYE-zon - was selected from more than 8,500 choices and combines the Latin word "veritas," meaning certainty and reliability, and "horizon," signifying possibilities ahead.

Q: Are you one of those guys who talks on a wireless phone while driving?

Mr. Devlin: "Yes. On my hands-free kit with both hands on the wheel."

Q: Bell Atlantic and Vodafone completed the merger Monday. On Tuesday, SBC and BellSouth announced their merger and by the end of the year they will be the second-largest wireless company behind your company. What is going on? Why is this happening now?

A: "It's happening now because to really succeed in this business you need to be very large. It's a very capital-intensive business. We announced we are spending $3.3 billion on networks. You can only do that if you have a large scale and scope . . .customers demand high-quality service. They want it to be almost home-like and office-like. There's only one way to do that, and that's to be big."

Q: What's the wave of mergers mean for the small, regional wireless carriers?

A: "There really aren't that many left . . .I think you'll see more and more of the regional carriers partnering up with the larger ones to reduce their roaming rates or come together and merge with the larger ones. The industry is going through tremendous consolidation, and that's due to the capital-intensive nature of the business. I believe you'll still have regional players out there because there are niche markets out there that maybe aren't cost-effective for the large players to play in."

Q: How do mergers and the formation of new and ever-bigger companies intensify the competition for wireless subscribers? Are you guys trying to steal each other's customers or trying to win the business of new wireless customers? Where's the bigger prize?

A: "Both. We are vigorously competing for the business of customers, whether they come from an existing carrier or they're new. The larger prize is the people who don't have a handset yet. There are many estimates as to the penetration . …