Bell Atlantic and AirTouch discuss merger

AirTouch Communications, the giant US mobile network operator, has confirmed it is in merger talks with Bell Atlantic, the largest regional phone operator in the US. Airtouch, which has stakes in a number of mobile operators throughout Europe, had been linked with the long distance carrier by commentators over the Christmas holiday.

Responding to several days of speculation, AirTouch issued a statement on Sunday evening which admits: "Discussions are taking place with Bell Atlantic that could lead to a possible combination between the two companies."

However, the company added: "The AirTouch board of directors has not approved a transaction and significant issues still remain unresolved. There can be no assurance that any transaction will result from these discussions."

Bell Atlantic, with a geographical footprint covering most of the US North-East, has expanded via large mergers. In 1997, it bought fellow Baby Bell, Nynex, and last year it announced it would fuse its businesses with those of GTE.

That deal would already create a serious adversary for AT&T, but the partnership would lack a large cellular business, something an AirTouch purchase would remedy. So far, analysts have estimated such a deal would cost Bell Atlantic $45bn in stock, representing a 10 per cent premium on AirTouch's current market capitalisation.

But a Bell Atlantic-AirTouch tie-up might be bad news for the UK's Vodafone group. During the last quarter of 1998, industry rumours had turned to a merger between AirTouch and the UK's largest network operator. Both companies have investments in cellular networks around the world, yet with surprisingly little overlap.

When asked if Vodafone saw the latest merger developments as a setback, a company spokesman declined to confirm whether the mobile operators have indeed been involved in merger negotiations.