July 28, 1998

Bell Atlantic and GTE Make Connection, Agree to Merge
Yi-Hsin Chang (TMF Puck)

ALEXANDRIA, VA (July 28, 1998) /FOOLWIRE/ -- Bell Atlantic (NYSE: BEL) and GTE (NYSE: GTE) have agreed to join in a merger of equals valued at $53.36 billion in stock. As outlined in today's press release, the combined company will be the nation's largest local exchange carrier and cellular phone service provider and will carry more than 30% of the world's international phone traffic. It also will be the world's largest phone directory publisher. Of course, the deal is subject to regulatory approval.

Under the terms of the agreement, GTE shareholders will receive 1.22 Bell Atlantic shares for each GTE share. Based on Bell Atlantic's closing price yesterday, that values GTE at $54.90 -- 1.5% below GTE's last close of $55 3/4. The "no premium" deal may come as a surprise considering that GTE has higher revenue growth, but taking into account GTE's $14.1 billion in debt as of the end of the first quarter, the transaction is actually worth $67.46 billion.

The companies expect the transaction will be accretive to earnings per share in the first year following the deal's completion. In addition, they expect to produce $2 billion in cost-saving synergies within three years of completion and generate an additional $2 billion in revenue synergies. Because the merger partners view the deal as a growth opportunity, they don't expect significant job cuts.

Like many other recent mega-mergers, GTE's chairman and CEO Charles Lee and Bell Atlantic CEO Ivan Seidenberg will serve as co-CEOs of the combined company. Lee will be chairman and Seidenberg will be president. In mid-2002, Seidenberg will become the sole CEO, and Lee will stay on as non-executive chairman until 2004, when that position also will be taken over by Seidenberg. The merged entity will be based in New York, current home of Bell Atlantic.

-- Yi-Hsin Chang (TMF Puck)

Related Links:
-- Telecom Time, The Lunchtime News 07/27/98
-- Bell Atlantic message board
-- GTE message board