Bell Atlantic, GTE May Sell GTE's Net Interests

LONDON (01/28/2000) - In an attempt to push forward their planned merger, Bell Atlantic Corp. and GTE Corp. yesterday filed a proposal with the U.S. Federal Communications Commission (FCC), outlining a plan to restructure GTE's Internetworking business.

The filing proposes selling 90 percent of the GTE Internet backbone division to the public, as well as US$500 million in investments outside of the company's local service area within three years of the completed merger, the two telecommunications companies said in a statement.

The appeal is aimed at jump starting the stalled FCC approval process that is keeping Bell Atlantic from a US$52.8 billion merger with GTE. The merger deal was first announced in July 1998 but is being held up by the FCC because of a regulatory conflict concerning the companies' proposed voice and data long distance business.

While Bell Atlantic has won approval from the government to sell long-distance services in New York state, the FCC ruling bars the company from selling voice and data long-distance services in much of its other local territory.

The conflict rises from the fact that GTE already operates long-distance service within the barred areas. [See "UPDATE3: FCC OKs Bell Atlantic for Long Distance," Dec. 22.] From the FCC's point of view, for Bell Atlantic to own GTE's Internet backbone would therefore violate the terms of the Telecommunications Act of 1996.

Yesterday's proposal to the FCC was Bell Atlantic's latest attempt to resolve the conflict (it does not effect GTE since it is a purely long distance company) by spinning off the Internet concerns in a publicly held company.

The proposal would allow Bell Atlantic to buy back a controlling interest of 80 percent in the valuable GTE Internetworking business within the five years following the merger.

Furthermore, the $500 million investment would be used for services to keep the merged company competitive with traditional local exchange carriers as well as updating, modernizing and offering advanced services to mass market customers, the companies said.

The proposal, which purposely mimics the SBC Communications Inc. and Ameritech Corp. merger approved by the FCC last June, meets public interest litmus tests put forth by the FCC, according to the statement.

Bell Atlantic, in New York, can be reached at +1-212-395-3400 or at http://www.bellatlantic.com/. GTE, in Irving, Texas, can be reached at +1-972-507-5000 or at http://www.gte.com/.

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