Bell Atlantic and Vodafone Eye Joint Venture in U.S. Richard McCaffery (TMF Gibson)
September 13, 1999
Bell Atlantic's (NYSE: BEL) nod that it is in talks with Britain's Vodafone AirTouch (NYSE: VOD) to form a U.S. joint venture came as no surprise to investors this morning. After all, Vodafone revealed as much last week and telecommunications investors by now must be punch drunk from all the industry alliances.
Bell issued a succinct statement yesterday confirming the talks -- confirming there can be no assurances negotiations will be successful and confirming it won't discuss the matter again until it's settled.
Any business combination between Vodafone, the world's largest mobile phone company, and Bell Atlantic, which will become second largest phone company in the U.S. once its acquisition of GTE (NYSE: GTE) is completed, would create a wireless giant hefty enough to challenge AT&T (NYSE: T) and Sprint (NYSE: FON) in the world's fastest growing and largest cellular market.
Bell Atlantic has about 6 million cellular subscribers in the United States, mostly in the Northeast, while AirTouch has more than 9 million wireless customers largely in the West and Midwest, as well as a large and expanding global presence.
Perhaps the weak response from investors has something to do with a similar release Bell Atlantic issued January 3 regarding negotiations to buy AirTouch. Two weeks later, discussions collapsed and Vodafone proceeded to buy AirTouch for $62 billion.
Or perhaps it's because, in an industry that moves at lunatic speed, investors are focusing on matters they can control and understand rather than uselessly speculating on the next big telecom play.
For example, Bell Atlantic investors who purchased shares in 1983 have watched that investment appreciate 1,671% in the last 16 years. They can't control whether Vodafone and Bell Atlantic will strike a deal, or whether, as Reuters reported today, a newly formed venture might be spun-off as a separately traded entity. Until it happens, all this is just grist for the daily news mill.
What investors do know is that $100 invested in Bell Atlantic December 30, 1983 grew to $1,671 as of June 30, 1999, compared to $1,224 for a similar $100 investment in the S&P 500. That's a nice climb. Since 1983 Bell has rewarded investors with average annual growth of 19.5%, compared to 17.9% for the S&P 500.
Rather than guessing when to jump in or out of Bell Atlantic in the event of a Vodafone alliance, investors should focus on the firm's improving operating and net margins, its steadily increasing dividend payments, and the progress it's making to enter the long distance services market against rivals Sprint and AT&T.
When and if some kind of a joint venture is consummated, investors will turn to Vodafone's fundamentals to determine whether its management will serve them as well. Investors can't do anymore than that.