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February 22, 1988


By CBR Staff Writer

BellSouth Corp, Atlanta, has agreed to pay an astonishing $75.5 per pop – head of population in the franchise areas – for Mobile Communications Corp of America. BellSouth’s new $28.75 a share agreed offer values the company at $710m in BellSouth shares: it previously bid shares worth $564m for Mobile (CI No 858) but withdrew the offer when the target said that it had had several approaches from rivals offering more (CI No 868). In order to observe the rules that bar the Bells from manufacturing or from offering value-added services, Mobile will spin off into a separate company telephone answering, manufacturing, national paging, air-to-ground and maritime communications businesses, and will issue shares in this new unit to its existing shareholders. Mobile has cellular franchises in eight cities including major markets in California, Texas and New York, and also has 450,000 paging customers in California, Texas, the Midwest, Northeast and Southeast. The deal, if it wins regulatory approval, will give BellSouth a total of 31 cellular markets in 34 cities. The $75 per pop that BellSouth has agreed to pay, if translated to Racal Electronics Plc’s Racal Vodafone unit on the basis that Vodafone’s population base is about 53m people, would value the subsidiary alone at almost UKP2,260m – against a market capitalisation for the entire Racal Electronics group of only a little over UKP950. Strikingly, Meltdown Monday has done nothing to damp down valuations on US cellular franchises – here BellSouth has agreed to pay $75 per pop, in August, McCaw Cellular Communications went public on a price equivalent to $70 per pop.

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