Bell Atlantic/ GTE Merger Approval — IDC Looks at What It Really Means

FRAMINGHAM, MA – JUNE 19, 2000 — The long-planned merger between Bell Atlantic and GTE finally received approval from the FCC on Friday, June 16, resulting in a communications behemoth with the scale and scope to compete with industry giants such as AT&T, MCI WorldCom, and SBC Communications. Re- christened Verizon, the combined company has operations in more than 30 states and controls more than 63 million access lines, making it the largest local phone company in the United States. IDC believes the merged company also brings considerable weight to the wireless market, serving more than 25 million wireless customers nationwide.


"The scale and scope of the new Verizon enables it to offer consumers and business customers an even greater variety of compelling service bundles, which is increasingly important in the highly competitive communications market," said Amy Harris, senior analyst with IDC's Residential and Broadband Telecommunications program. "Additionally, as a result of the merger, the re- branded company is now well positioned to become a formidable contender in the Internet and high-speed data, long distance, and international communications markets."

GTE's Internet backbone, GTE Internetworking, is one of the most highly prized trophies of the merger. It offers the possibility of attractive new opportunities for Bell Atlantic, who does not own a comparable network. Unfortunately, this precious gem was snatched away from Bell Atlantic during FCC negotiations and placed just beyond its reach. The transmission of Internet traffic is considered interLATA service by the FCC, and Bell Atlantic does not have long distance approval in most of its RBOC region. Therefore, the carrier was not allowed to enter into a merger that would give it ownership of the Internet backbone.

According to Rena Bhattacharyya, an analyst with IDC's Residential Broadband Telecommunications and Small Business Telecommunications Services research, "The merger of Bell Atlantic and GTE creates several advantages for each carrier when it comes to competing in the long distance market. First and foremost, the newly created Verizon will have a greatly expanded footprint, allowing it to become a key player in the national long distance market — quickly moving Bell Atlantic and GTE from their regional focus and taking them to a higher level in terms of coverage and scope."

IDC further believes Verizon Wireless has become a significant wireless player and a critical piece of the new Verizon organization. Including GTE's domestic cellular and PCS businesses, Verizon Wireless now ranks as the nation's largest wireless company, serving more than 25 million wireless, and nearly 4 million paging customers. Its footprint covers more than 90% of the United States and 96 of the top 100 U.S. wireless markets. Verizon Wireless will surely prove to be a strong aspect of Verizon's overall business. With the combination of PrimeCo, Vodafone AirTouch, and Bell Atlantic Mobile's wireless assets, as well as the addition of GTE's wireless business, Verizon Wireless will have a 33% share of the U.S. wireless services market, or more than 25 million subscribers.

And yet, not all is rosy with Verizon. IDC believes the carrier faces a number of challenges resulting from the merger. To begin with, it must devote considerable resources to rolling out a national re-branding program and developing brand recognition to familiarize customers with its new brand image. Moreover, the company must begin the arduous process of integrating two large and often unwieldy incumbent telcos. Additionally, although Verizon can and will survive without GTE's Internet backbone, the one piece it lost as a result of the merger, it will need to devote valuable resources to reacquiring Genuity to fully round out its portfolio of products and services.

About IDC

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