The US Federal Communications Commission (FCC) has approved the merger between Bell Atlantic and GTE, creating the largest local telephone company in the US.
The commission announced its approval of the merger late Friday by a 5 to 0 vote. However, the FCC added that the approval is subject to numerous merger conditions, including a requirement that nearly all of GTE's nationwide Internet business be spun off into a separate company.
Bell Atlantic and GTE officials hailed the FCC's decision, saying it is a great day for customers, investors and company employees. The merger has now received the approval of all regulators, including the US Department of Justice (DOJ) and US state regulators as well as shareholders.
Charles Lee, chairman and chief executive officer of GTE and designated chairman and co-chief CEO of the new company, said the FCC approval contains reasonable conditions for the new company. The new company will be called Verizon Communications and will be worth about $US150 billion, employ 260,000 people and have 63 million local phone lines.
The Bell Atlantic, GTE merger was first announced in July of 1998. The proposed merger ran into difficulties due to a lengthy investigative process to ensure that it wouldn't violate provisions of the Telecommunications Act of 1996. The move is necessary because the act forbids Bell Atlantic from entering the long-distance market until the local phone market is open to competitors.
In January of this year, Bell Atlantic and GTE sought to resolve ownership issues by agreeing to spin off 90 percent of the GTE Internet backbone, creating a company called Genuity. They also agreed to divest $US500 million of investments outside of GTE's local service area within three years of the merger's completion.
Under the terms of the FCC's approval, Genuity would sell 90.5 percent of its shares to the public through an IPO (initial public offering). Verizon will retain a 9.5 percent stake in Genuity, however Verizon will have an option to increase its ownership in Genuity to as much as 80 percent, according to the companies.