Bell Atlantic and NYNEX Merger: Analysis of Prospects and Challenges

Strategic Insights -

A potential merger between Bell Atlantic Corp. and NYNEX Corp. has been met with caution by industry analysts, citing concerns over personnel, antitrust, and market issues that could impact profitability. Despite the positive synergy between the two companies' markets, particularly in the lucrative Northeast Corridor, analysts warn of potential clashes over top positions, extensive layoffs, and antitrust issues. A recent study by Probe Research, Inc. found that the telephone side of both companies' operations has been generating relatively flat returns, with per-line revenues and assets increasing by less than 0.5% annually.

Key Takeaways:

  • The merger would create one of the largest and most profitable local exchange markets in the US, comprising Boston, New York, Philadelphia, and Washington.
  • The combined companies would likely face significant layoffs, with around 10,000 employees potentially losing their jobs over 18 to 24 months.
  • Analysts predict a substantial reduction in corporate services, human relations, legal, and external affairs functions, potentially resulting in "downsizing" and job cuts.
  • The merger could lead to a major shift in the telecommunications industry, with larger companies having more resources for research and development, but also posing a threat to smaller players.
  • The deal may trigger other mergers of telecom giants, as companies seek to avoid being left out of the market for big players.
  • Antitrust regulations pose a challenge to the merger, with some analysts predicting that the Justice Department may take action if merged companies engage in predatory pricing.
  • Pacific Telesis Group has been named as a potential partner of Bell Atlantic and NYNEX, which could create a massive enterprise with significant market power.

Statistics:

  • The combined number of employees dropped from approximately 143,600 in 1988 to around 105,400 at the end of 1994 for both companies.
  • Per-line revenues and assets for both companies increased by less than 0.5% annually between 1988 and 1994.
  • The telephone side of both companies' operations has achieved 7.5% annual increase in revenues and assets per employee during the same period.
  • The combined area of Boston, New York, Philadelphia, and Washington constitutes the most lucrative single market in the US.
  • The merged company could carry half of the international traffic in the country.

Sources:

  • The Wall Street Journal
  • Telephony Magazine
  • Probe Research, Inc. report "The Telephone Book IV"
  • Deloitte & Touche Consulting Group
  • PaineWebber
  • Schroder Wertheim
  • LDDS WorldCom