New world order in wireless

A week after the company struck a deal to merge with the British Vodafone Group, executives of the joint company say one of their top priorities is renewing talks with Bell Atlantic, which was the losing bidder for AirTouch.

In an interview with CNET News.com, AirTouch chief executive Sam Ginn and Vodafone CEO Chris Gent said a business deal with the Baby Bell is key to winning a nationwide footprint in the United States. Additionally, a deal would help the merged company compete with AT&T's and Sprint's wireless operations.

While such a pact could benefit Bell Atlantic as much as the new Vodafone AirTouch, the merged company may have to hop a couple of hurdles along the way. The Bell has filed suit against AirTouch in federal court, in an attempt to nullify a joint agreement clause that prevents the two companies from competing against their joint subsidiary in some markets.

But Ginn and Gent say they are confident that any ill feelings left over from the bidding war can be overcome, and that Bell Atlantic can be brought in as a U.S. partner. In the meantime, they're beginning the process of explaining their cross-Atlantic merger to the world.

On Friday, Gent spoke to employees at AirTouch headquarters in San Francisco to outline the combined strength of the two companies. Each of the firms has pursued roughly the same international strategy--bidding for wireless licenses as countries privatize their telecommunications markets, and trying to become one of the key players in each market.

The combined company now far outstrips the reach of any other wireless operation in the world, they say.

"There's nobody in the same league as Vodafone AirTouch," Gent said, as the company now covers close to 23 million mobile phone customers in 24 countries. "That was one of the attractions here. We were putting together something of world scale."

"We have really created a unique asset," Ginn agreed. "That's what made AirTouch so valuable in the first place. You couldn't recreate it. You only had one of them and it was going to go to somebody."

The pair discussed their merger agreement and plans for the new wireless giant's future in an interview with CNET News.com.

CNET News.com: Was there anything other than the size of the offer that made the Vodafone bid more attractive than Bell Atlantic's?
Ginn: Both of these offers had their advantages. The Bell Atlantic offer allowed us to fill out our U.S. footprint, a very advantageous thing to do. The Vodafone offer positioned the company for global expansion.

So both of them were valid strategic objectives, and either one of them would have worked. Except when the market found out about this, it clearly voted for Vodafone. Every time they would talk about the offer, their share price would go up, and Bell Atlantic's would go down based on the dilution that their investors thought they would take.

Gent: It's very important that both sets of investors clearly feel this is a good idea. That's one of the most encouraging and unusual features. Normally, the buying investors will get concerned and the price will come off, but that has not happened in this case.

How do you see yourself expanding at this point?
Gent: You can't be a world player without having a massive presence in the States, which is what AirTouch has. And it's important that we do conclude an agreement with Bell Atlantic, because we want a countrywide footprint in the States.

Are they the only, or the best U.S. partner for you at this point?
Ginn: They are the choice, but not the only option.

Are you currently in talks with the company now?
Ginn: Both of us have had conversations with their CEO. But I would say that as soon as we get through this week and get into next week we'll be seeking to open up conversations in a way that we really begin to understand each other's priorities.

What do you see as potential hurdles to that, if anything?
Ginn: I think on the face of it, these assets were evolved over ten years to be put together. That's just being frank about it. We had contracts with them to integrate our operations, our systems, to recognize roamers. We created a joint venture, we created PrimeCo PCS. And so I think the most efficient alternative would be for us to negotiate an agreement.

That agreement can go through a whole range of alternatives, from a roaming agreement, to interconnecting our networks, to establishing a nationwide brand or a joint venture. So there are a whole range of things that one could do to improve our current situation.

Do you see any way that you could take a stake in Bell Atlantic or they could take a stake in you?
Ginn: I don't think that's a realistic possibility.

The joint company you've formed is obviously very attractive. Is there any chance that other overseas companies could try to take over the combination? Or are you too big for that now?
Gent: We don't know whether we're too big or not. You never think you're too big. But we intend to get bigger ourselves, and be a force for consolidating more mobile businesses around the world, to extend our geographic footprint in places where we're not, and we'd like to be.

Ginn: Our market cap is higher than British Telecom.

Gent: And Deutsche Telecom. And France Telecom. In fact, Vodafone AirTouch, if you want to take it from a European standpoint, is the largest telecommunications company.

Do you expect to get into wireline communications at all?
Ginn: We believe these terms will wash away. What is wireline? What is wireless? We think they will be meaningless in a few years.

We believe that technology is going to smile on wireless, and the wireless platform. While our focus and concentration are wireless links, we're going to add to that wireless platform all kinds of services.

If you look at a consumer's total telecommunications needs, we think increasingly those needs can be met on a wireless platform, be they mobility, be they long distance, be they Internet access, be they whatever.

Can you handle large amounts of data? Will you need to partner with a fiber optic network?
Ginn: I think at some really high data speeds, we're not going to be able to do the job, like fiber can do the job.

Gent: But certainly most consumer requirements will be perfectly satisfied by wireless access three years out, four years out.

Ginn: We're going to be able to approximate wireline speeds here in a few years. And when you add the convenience of mobility, we've really got a shot at those customers.

What has worked for us is that we know more about wireless than anybody. But if we can add additional services with small amounts of capital for great amounts of revenue, we will do that. Where somebody else can do it better I think for the moment we're going to let them serve those segments.

Gent: Our principal and primary is wireless and cellular for the time being.

Ginn: Now, that doesn't say that if some fiber optic company wants to join with us and offer a service, and we found that in our interest, we wouldn't be prepared to do that.

Gent: Again, with third generation [technology] we'll be cooperating with media and content companies to exploit new value-added services. That, five years plus, may provide opportunities for further business diversification.

What's the next step for the company?
Gent: Next step over this year is we have to put these two organizations together. That's very important, so we do continue to execute in the manner we've been doing up until now. The third generation thing [debates over settling a new global wireless technology standard] has to be sorted.

The Bell Atlantic relationship has to be sorted. Those are the three priorities. And then, yes, we'll be looking at further expansion into new assets and to increase our position in existing assets.