Bell Atlantic wireless deal hurts AT&T

Long-distance phone company AT&T Corp. said Tuesday that the coast-to-coast wireless joint venture between Vodafone AirTouch and Bell Atlantic Corp. created a formidable competitor.

The long-awaited venture will dwarf AT&T's (NYSE:T) wireless service in number of customers. The deal could also spur consolidation in the sector as more companies try to create national networks, an AT&T senior wireless executive said.

"I think all significant wireless carriers are going to have to have a significant national footprint in the relatively near future,'' said Jordan Roderick, executive vice president for wireless products and technology in AT&T's wireless services unit.

The joint venture will enable Vodafone and Bell Atlantic (NYSE:BEL) to offer a "a much more competitive service package,'' especially to corporate customers, he said.

'A fantastic deal'
"This is part of an ongoing consolidation and I think there will be more,'' Roderick added. The companies "can offer nationwide service to corporate customers, which is one of their reasons for the merger in the first place.''

Kevin Roe, an analyst with ABN AMRO, called the joining of forces "a fantastic deal.''

The two companies will have the scale to be able to create competitive pricing plans, especially for corporate customers, and drive down equipment costs, he said.

Bob Wilkes, an analyst at Brown Brothers Harriman, said the Vodafone move was part of a long series of mergers among jostling telecom heavyweights.

He added that BellSouth Corp. (NYSE:BLS) and Ameritech Corp. (NYSE:AIT) could be among potential future partners, since they share CDMA technology. CDMA stands for Code Division Multiple Access and is one of the digital mobile phone systems.

The Bell Atlantic-Vodafone merger would create easily the biggest U.S. mobile phone network, with 20 million customers. AT&T has about 11 million customers, and Sprint PCS Group, the next-largest system, has about 4 million.

Bell Atlantic will own 55 percent of the new company and Vodafone, the world\'s biggest cell phone operator, will own the rest.

Remnants of AirTouch
The network that Vodafone inherited in its $62 billion takeover of San Francisco's AirTouch in January covers most of the U.S. western states. Bell's system covers most of the eastern United States.

Bell Atlantic shares were up 5/8 at 64 1/4 in midday trade and Vodafone's American Depositary Receipts were up 4 3/4 at 216 5/8. AT&T was up 1/16 at 45.

Bell Atlantic and Britain's Vodafone said they would fuse their U.S. wireless businesses in a joint venture worth more than $70 billion.