Turning the established order in the multimedia world on its head, Bell Atlantic Corp yesterday announced plans to distance itself in size from the other Baby Bells by acquiring Tele-Communications Inc, the biggest cable television operator in the US. The share exchange acquisition is valued at some $21,400m including assumption of debt – but Tele-Communications is seen as such an attractive prize that the agreed bid from the Philadelphia local phone company may well not be the end of the story. Bell Atlantic agreed to pay 220m new Class B shares, valued at some $11,800m, and will also assume some $9,600m in debt. Bell Atlantic had annual turnover of $12,600m last year, Tele-Communications $3,600m. The deal is complicated by the fact that Tele-Communications and Liberty Media’s interests involve some long distance service, so Bell Atlantic must obtain a waiver from the bar on it offering long-distance service before acquiring these assets. It is also barred from owning the Tele-Communications cable operations within its Eastern Seaboard region of local telephone operations, and if it does not get the necessary waivers, it will distribute the assets to the existing shareholders, creating a new publicly-traded company. Bell Atlantic would provide $1,000m to the new company and receive a 5% five-year note, and warrants to buy 19.9% of the new company, exercisable at a fixed price. It exepcts the overall acquisition will result in earnings per share dilution of 30% to 35% in the first year after closing, with goodwill amortisation accounting for about one-third of that. Underlining the Bell’s ambitions, the news comes only days after the company, already the dominant player in third party computer maintenance via its Sorbus and sundry related buys, agreed to invest $1,040m for a potential 42% stake in Mexican cellular operator Grupo Iusacell SA (CI No 2,273). It is also a major shareholder in Telecom Corp of New Zealand Ltd. Bell Atlantic is the second Bell to make a move for a cable television operator and programme-maker: US West Inc, like Tele-Communications based in Englewood, Colorado, paid $2,500m for a 25% stake in Time Warner Entertainment Inc in the summer. Bell Atlantic, the only Baby Bell so far sanctioned to deliver cable programming within its local telephone service area, although that ruling is being appealed, immediately increases its reach to 42% of the homes in America when Tele-Communications’ 25% of the cable market is included with its own phone network. In the big fleas-little fleas department, Tele-Communications is of course backing home shopping services operator QVC Network Inc in its counter-bid for Paramount Communications Inc, and is in process of reacquiring Liberty Media Corp, which in turn owns 22% of QVC. The Bell Atlantic move for Tele-Communications leaves the other bidder for Paramount, cable operator and programmer Viacom Inc somewhat exposed: Nynex Corp has agreed to invest $1,200m in Viacom, but after its neighbour’s move, may now want to buy it outright.
