GTE Corp.'s unsolicited cash bid of $28 billion for MCI Communications Corp. has industry insiders saying the third offer is the best fit yet in terms of service and marketing.
British Telecom was MCI's first suitor with a $24 billion stock and cash offer a year ago. That offer was recently readjusted down to $19 billion, opening the door for WorldCom to sneak in earlier this month with a $30 billion stock offer. Speculation about the volatility of WorldCom's stock spurred GTE, the third-largest local telco, to jump in with its all-cash bid.
"GTE/MCI makes the most sense out of all three because of the marketing angle," said Jeffrey Kagan, president of Kagan Telecom Associates. "All the telecom companies are talking about bundling services and one-stop communications shopping. This is the first merger that would do that."
And, Mr. Kagan said, GTE, like WorldCom, would benefit from MCI's strong brand name and marketing expertise.
"There would be more synergy in a co-branded GTE and MCI," agreed Kieran Taylor, analyst for consultancy Telechoice. "MCI owns the national, long-distance piece and GTE owns the local. GTE has spent considerable time marketing to local subscribers and that's what MCI needs. It would be a message along the lines of `We provide service to your neighborhood and to the nation.' "
GTE also recently bought Internet service provider BBNPlanet and had planned to spend about $8 billion upgrading that network to connect across the country. MCI's extensive national Internet and long-distance network would make that upgrade unnecessary.
AGENCIES A QUESTION MARK
The effects of a GTE/MCI merger on agencies is a long-range question still to be addressed. MCI agency Messner Vetere Berger McNamee Schmetterer/Euro RSCG, New York, had already begun to do work for the initial British Telecom/MCI holding company.
GTE and Ogilvy & Mather are rumored to be having settling-in problems. Executives familiar with the relationship said O&M is having trouble staffing a Dallas office, a stipulation in winning the contract in February. Two Omnicom Group's units absorbed the entire Focus GTE staff when DDB Needham Worldwide lost the account.
O&M's fall national campaign for GTE also is running behind schedule, though GTE executives said the problems were common delays associated with putting together a large campaign.
Copyright October 1997, Crain Communications Inc.