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Tuesday, May 18, 1999


GTE-Bell merger
overcomes hurdle

Shareholders of HawTel's
parent OK the deal but further
approvals needed

From staff and wire reports
Tapa

ATLANTA -- GTE Corp. shareholders approved its acquisition by Bell Atlantic Corp. for $82.8 billion, the latest step to creating the largest U.S. phone company.

At a shareholder meeting in Atlanta, GTE, the third-largest U.S. local phone company and parent of Hawaiian Tel, said investors representing 76 percent of its outstanding shares voted for the transaction, above the two-thirds needed. Bell Atlantic shareholders will vote on the transaction tomorrow.

The combination faces opposition in two states and perhaps a more challenging hurdle at the Federal Communications Commission, where Chairman William Kennard signaled phone company mergers will get tough scrutiny.

If completed, the merger will vault the new company ahead of AT&T Corp. as the largest U.S. phone company with a third of the local U.S. phone markets and the most wireless customers.

"Our shareholders have given us a resounding vote of confidence," said Charles Lee, GTE's chairman and chief executive.

In addition to approval from Bell Atlantic shareholders, the companies still need approval from the FCC and regulators in about 12 states, including Hawaii.

The state Office of Consumer Advocacy has filed an objection to the merger as is and has asked the Public Utilities Commission to impose conditions if the panel approves the acquisition.

Among the conditions sought are that the PUC require that any benefits and savings from the merger be fairly shared with GTE customers in Hawaii.

"We didn't see anything in the company's application that they had any intention of sharing these savings with local rate-payers," said a consumer advocacy representative.

Several local competitors of GTE, including AT&T, Sprint Corp., Oceanic Communications and GST Telecom Hawaii, also have asked the PUC to impose conditions on the basis that the merger is anti-competitive.

Earlier this month, the combination won U.S. antitrust clearance when the Justice Department approved it after the companies agreed to sell wireless operations in 65 local markets, including Chicago, Houston, Dallas, Richmond, Va. and Tampa, Fla. The Justice Department said it is one of the largest such divestitures ever required in a merger.

The FCC must determine whether Bell Atlantic-GTE can continue to offer long-distance service to GTE's 100,000 customers in Bell Atlantic's territory in the Northeast. Irving, Texas-based GTE, a major provider of Internet service, uses long-distance lines to transmit data.

New York-based Bell Atlantic is barred from offering long-distance service within its local phone markets until it opens those markets to competition.

The FCC's staff already has found problems with another large local phone acquisition. The staff has said SBC Communications Inc.'s plans to buy Ameritech Corp. should be rejected as anticompetitive unless changes are made.

Under the acquisition, which was announced July 28, each GTE share will be swapped for 1.22 Bell Atlantic shares.



Bloomberg News and Star-Bulletin reporter
Rob Perez contributed to this report.



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