Jim Sinclair <jcs1@gte.com> (07/13/90)
I thought that the readers of comp.dcom.telecom might be interested in the following announcement: NEW YORK, July 12 -- GTE Corporation (NYSE - GTE) and Contel Corporation (NYSE - CTC) jointly announced today that the boards of directors of both companies have agreed in principle to merge the two telecommunications giants in a transaction valued at approximately $6.2 billion, as of yesterday's closing price. Under the proposed merger agreement, which is subject to approval by the directors and stockholders of both companies as well as various regulatory agencies, GTE will issue 1.27 shares of its common stock in a tax-free exchange for each Contel common share, or about 200 million GTE shares. James L. "Rocky" Johnson, chairman and chief executive officer of GTE, characterized the merger as "a perfect combination of two great companies. GTE's telecommunications businesses and organizational structure complement those of Contel, and this alliance will both position the company strategically and enable us to exploit more fully the many opportunities for growth that exist in the worldwide telecommunications marketplace." He noted that the merger will result in an organization that ranks as the country's largest local-exchange telephone company and the second-largest cellular-telephone operator. The combined company's local-exchange operations would have a total of 17.7 million access lines, and its cellular-telephone business would serve approximately 50 million "POPs." Charles Wohlstetter, Contel's chairman, said, "This merger will provide the critical mass and financial strength Contel has sought in order to accelerate the many initiatives we have recently taken across a wide spectrum of ventures in the field of telecommunications. These plans fit so well with those of GTE that it is hard to imagine any other two companies in such an ideal position to move forward together. All of this leads me to the firm conviction that the agreement to merge is in the best interests of Contel's shareholders and employees." Wohlstetter also noted that Contel stockholders will benefit from an increased dividend resulting from the exchange of shares. GTE currently pays a dividend of $1.46 per share, whereas Contel pays a dividend of $1.10. "Given the common stock exchange ratio, this would equate to a dividend of approximately $1.85 per Contel share," Wohlstetter said. GTE subsidiaries operate in 46 states and 41 countries, with combined revenues and sales of $17.4 billion and net income of $1.4 billion in 1989. GTE is a leader in its three core businesses -- telecommunica- tions, lighting, and precision materials -- providing products and services worldwide. It has 158,000 employees. Contel is a major local telephone and cellular service provider. Its telephone operations serve 2.6 million access lines in 30 states and it operates cellular systems through a 90%-owned subsidiary, Contel Cellular, Inc. (NASDAQ - CCXLA), in 36 metropolitan areas. Contel's 1989 revenues were $3.1 billion, with net income of $277 million. It employs 22,000. "Aside from the obvious synergy of our telephone and cellular operations," Johnson said, "both companies have other areas of interest that are remarkably parallel. We both have large and successful units that provide telecommunications service and systems to government entities. We're both in satellite communications, and we have each undertaken significant initiatives in providing a combined cable-television and telephone service to residential communities. In addition, both companies have significant research activities which will make the combined entity an industry leader in applied technology. "Both companies have recently undertaken major restructuring programs to make our businesses more competitive, and have placed the highest priority on quality and productivity programs to better serve our customers. It is clear that all of these activities are uniquely positioned to benefit from the merger not merely through economies of scale, but also through the vastly enhanced reach of our combined resources as well as the coming together of the talented people of our two organizations," Johnson said. The announcement noted the new company would operate as GTE Corporation. Johnson will remain chairman and chief executive officer, and Charles R. Lee will continue to be president and chief operating officer. Wohlstetter and John L. Segall, who is currently vice chairman of Contel, will both serve as vice chairmen of the merged companies. When a new board is constituted, five of its directors will be nominated from Contel's current board. Donald W. Weber, president and CEO of Contel and a veteran of more than 25 years in the telephone industry, will occupy a key position in the merged entity. Wohlstetter, who is slated to chair the Strategic Issues, Planning and Technology Committee of the new board, echoed Johnson's remarks on the synergistic character of the merger. "Our two companies," he said, "have a very consistent outlook on the opportunities that are at hand in the world marketplace for telecommunications, and we have a common understanding of the value of size and reach in the highly competitive environment in which these opportunities must be grasped. We share a strong conviction that the combination of our respective resources will create a market force that neither of our companies could have achieved alone. And the timing," he added, "could not be better." Jim Sinclair GTE Laboratories Waltham, MA jcs1@gte.com
zank@ames.arc.nasa.gov (Mathew Zank) (07/15/90)
Standard & Poors have said that they may downgrade GTE's bonds and and other debt (this is bad news for GTE bond holders because the bonds will drop in price) S&P says it will do this because the merger will make GTE the 2nd largest cellular company, but GTE will take on a lot of debt from Contel Cellular because the acquisition of McCaw Cellular by Contel. Contel has not earn a dime on this yet in 1989 Contel lost 12.5 million dollars on the Cellular operations.