World's Largest Cell Phone Co.
AirTouch Communications Inc. is being acquired by Britain's Vodafone Group PLC in a $56 billion cash-and-stock deal, giving Vodafone an entry into the U.S. market and creating the world's largest cellular phone company.
The announcement late Friday ended a two-week bidding war and came just hours after Bell Atlantic said it had broken off talks with AirTouch, the nation's second-largest independent cellular phone company.
Bell Atlantic, a formidable East Coast phone company, hoped to build a nationwide cellular network with the San Francisco-based AirTouch.
By buying AirTouch, London-based Vodafone gets access to the $30 billion U.S. cellular phone market, and AirTouch's fast-growing international assets, which stretch from Sweden to Egypt. The two companies are partners in two European ventures and only compete in Germany.
"AirTouch wins no matter who buys them, so they're happy," said Jeffrey Kagan, an independent telecom analyst in Atlanta.
Indeed, Vodafone raised its offer from a reported $90 a share, or $52 billion, to $97 a share. The sweetened bid represents a 16 percent premium over AirTouch's closing stock price Friday.
Vodafone will pay $88 a share in its stock, and $9 in cash, the companies announced.
Sam Ginn, chief executive of San Francisco-based AirTouch, will become the new chairman of the combined company. Chris Gent, Vodafone's chief executive, will retain his title.
The companies said they hoped to complete the deal in late 1999, pending approval by regulators in the United States and Europe.
"Vodafone will now have a foothold in the United States, but I don't see that affecting the U.S. wireless marketplace," Kagan said.
Kagan said he had hoped that Bell Atlantic, which offered $45 billion for AirTouch, would have won so that the two companies could have made a stronger challenge to AT&T Corp.'s national, flat-rate cellular phone plan.
But New York-based Bell Atlantic had too much at risk a $53 billion acquisition of GTE Corp., which is still awaiting regulatory approval.
"If the bidding war made Bell Atlantic's stock price volatile, or fall, then that could have screwed up their deal with GTE, and they couldn't risk that," Kagan said.
The number of worldwide cellular phone subscribers is expected to soar from 285 million in 1998 to 615 million within four years, according to Strategis Group, a telecom consulting company in Washington.
Much of that growth will come in countries like Russia, India and China, where it would be costly to connect remote villages.
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