GTE Corp. Agrees to Buy Half of Ameritech's Wireless Business

Strategic Insights -

GTE Corp., the second-largest local telephone company in both Missouri and Illinois, has agreed to buy about half of the wireless business of Ameritech Corp. in a deal worth $3.27 billion in cash. This sale would pave the way for a merger of GTE's two biggest competitors in those two states, Ameritech and SBC Communications, and give GTE a jump-start towards becoming a major player in the Chicago and St. Louis markets.

The deal would give GTE an immediate customer base for offering the whole package of phone services - wireless, local, and long-distance - in Chicago and St. Louis. Chicago is the nation's third-largest cellular market, and Ameritech's wireless franchise there is the market leader. The sale is contingent on the SBC-Ameritech merger going through, but is not contingent on GTE's own plan to merge with Bell Atlantic, which would create a combined operation with 13 million wireless subscribers, the most of any U.S. telecommunications company.

Key Takeaways:

  • GTE Corp. is acquiring about half of Ameritech's wireless business in a deal worth $3.27 billion in cash.
  • The sale would pave the way for a merger of GTE's two biggest competitors in Missouri and Illinois, Ameritech and SBC Communications.
  • The deal would give GTE an immediate customer base for offering the whole package of phone services in Chicago and St. Louis.
  • GTE plans to set up a new subsidiary, Davenport Cellular, to run the Ameritech operation after the sale.
  • About 1,700 Ameritech employees would become GTE employees after the sale.
  • Georgetown Partners, an investment banking firm, is paying about $60 million for a 7 percent stake in the business that Ameritech is selling.

Statistics:

  • The deal is worth $3.27 billion in cash.
  • The combined operation of GTE/Bell Atlantic would have 13 million wireless subscribers, the most of any U.S. telecommunications company.
  • The sale would give GTE an immediate customer base of 1.7 million cellular subscribers in 20 Midwestern markets.
  • GTE has 1,700 Ameritech employees expected to become GTE employees after the sale.
  • Georgetown Partners is paying about $60 million for a 7 percent stake in the business that Ameritech is selling.

Sources:

  • Post-Newsweek Business Information, "GTE To Buy Half of Ameritech Wireless Business"