STAMFORD, Conn.-- May 6, 1997 -- GTE today announced a series of steps toposition itself as a market-leading, national provider of integratedtelecommunications services, according to GTE Chairman and Chief ExecutiveOfficer Charles R. Lee, including a comprehensive plan to enter the $100 billionmarket for value-added data communications services -- the fastest-growingsegment of the telecommunications industry.
The actions include the acquisition of BBN Corporation, a leading provider ofend-to-end Internet solutions; a strategic alliance with Cisco Systems, Inc. tojointly develop enhanced data and Internet services for customers; and, thepurchase of a national, state-of-the-art fiber-optic network from QwestCommunications. Also included is the creation of a new, deregulated unit tomarket integrated voice, video and data solutions both within and outside GTE'scurrent markets.
"The actions announced today clearly position GTE to have the fastest, mostreliable and most secure national network available, enabling end-to-end managednetwork solutions that we believe will be unmatched in the industry," said Lee.
In detailing its data plan, GTE said the moves announced today will enable it to:- Develop innovative and value-added communications services to meet customerneeds, especially in the fast-growing Internet-services market;
- Create a broadband, national backbone network based on SONET self-healing fiberrings; and
- Rapidly deploy "next generation" value-added services and Internet Protocolofferings.
"Simply put, GTE will become a leading national 'one-stop' provider of local,long distance, Internet and wireless services, and will establish an advanceddata network that will be fully operational next year," said GTE President KentB. Foster. "At that point, we will be in a position to reach virtually theentire U.S. population."
GTE/BBN
Under the terms of the transaction, which was approved by the Boards of Directorsof both companies, GTE will shortly commence a cash tender offer to acquire allthe outstanding shares of BBN common stock at a price of $29 per share. Based onthe number of shares of BBN stock currently outstanding, the equity portion ofthe transaction is valued at approximately $616 million. As soon as practicablefollowing the conclusion of the tender offer, GTE will initiate a merger throughwhich any remaining shares of BBN not owned by GTE will be converted into cash atthe cash tender offer price in the merger.
Cambridge, Mass.-based BBN is a leading provider of high performance end-to-endInternet solutions such as World Wide Web site hosting, network security,consulting, systems integration, and dedicated and dial-up Internet access forgovernment and commercial customers. Its 2,200 employees have extensiveexperience in leading-edge Internet and other telecommunications applications.Twenty-eight years ago, BBN created ARPANET, the forerunner of the Internet.
"GTE will jump-start its entry into the enhanced Internet services market forlarge businesses through the acquisition of BBN," said Foster.
George H. Conrades, chairman and chief executive officer of BBN said, "Thisbusiness combination is a perfect strategic fit. The Internet opportunity,characterized by the convergence of computers and communications, is thefastest-growing economic endeavor in human history. GTE is today declaring itsstrategic intent to be a leading player in this important opportunity, backed upby plans for significant investment and alliances. BBN has been chosen to be thecornerstone of GTE's new strategy. We bring needed Internet skills, a suite ofofferings and a business customer base.
"At the same time, we will be able to take advantage of GTE's strong brand image,distribution, network expansion plans and financial resources. Today, no oneplayer in this industry has all the piece parts necessary for customer andcompetitive success. It's a game of scale and financial resources, as well asspecialization and innovation. With this announcement, GTE, with BBN, is off toa great start," Conrades said.
GTE/Cisco
GTE and Cisco announce their intention to jointly develop enhancedinternetworking capabilities to power GTE's network. Beyond the networkinfrastructure, the companies have committed to deliver targeted, turn-key,bundled solutions of applications, equipment installation, maintenance andtelecommunication services.
"Cisco is the leading provider of Internet-related networking services. Itsskill sets perfectly complement those of GTE, and we are pleased to enter intothis long-term, mutually beneficial strategic relationship," said GTE's Foster.
"This combination will create a fundamentally new offering in the marketplace," said John Chambers, president and chief executive officer at Cisco Systems, Inc. "GTE will have leadership capabilities to provide integrated end-to-end servicesacross all layers of the network such as multimedia, quality and security. Therelationship will accelerate the deployment of these and other services throughthe alignment of our core competencies."
GTE/Qwest
Denver-based Qwest Communications Corp. is constructing a fiber-based nationalbackbone network which will be equipped with state-of-the-art opto-electronics. The network will span 13,000 miles, connecting 92 metropolitan areas, includingAtlanta, Chicago, Los Angeles, New York, San Francisco and Washington, D.C. Inan agreement announced Monday, GTE will acquire 24 dark fibers, and certainassociated facilities, in the new Qwest network.
"When completed in 1998, the network will provide the foundation for a myriad ofhigh-speed data communication services. GTE's network will greatly reduce thehigh upfront cost of today's private data networks, making advanced datacommunications more affordable for a greater segment of the population," Fosterstated.
"We are extremely pleased with GTE's acquisition of dark fiber on the Qwestnetwork route," said Joe Nacchio, president and chief executive officer ofQwest.
GTE Restructures Telephone Operations, Creates New National Sales, Service andMarketing Company
As part of the company's plan to capture new growth, GTE restructured itsTelephone Operations unit, Foster said.
To move with greater flexibility to capture growth opportunities in thetelecommunications marketplace, GTE created an unregulated sales, service andmarketing unit to offer an integrated package of local, long distance, Internetand wireless services nationwide, regardless of GTE's traditional marketboundaries.
This new unit will operate as a competitive local exchange carrier (CLEC),offering targeted customers premium servicing capabilities and packaged productsbeyond what is currently available in the marketplace today.
Foster also announced the following realignment of key responsibilities: ThomasW. White, 51, has been named corporate executive vice president-marketoperations, reporting to Foster. He will assist the GTE president incoordinating the activities of the below-mentioned business units and also willbe responsible for leading the company's overall data thrust. White has servedas president of GTE Telephone Operations since July 1995.
Also reporting to Foster are the following newly appointed individuals:- Lew Wilks, 43, has been named president of GTE's new national sales, serviceand marketing unit. This new retail business unit will offer a bundled packageof premium telecommunications services to business and residential customers bothwithin and outside GTE's current franchise areas. Wilks previously served aspresident, business markets, since July, 1996.
- John Appel, 48, has been named president of GTE's current regulated localexchange operations. Appel will continue work already underway to enhancequality and customer service and to preserve and grow GTE's current in-franchise,regulated business. Appel was appointed to his previous position, executive vicepresident-Network Operations, in January 1996.
- Jerry Dinsmore, 47, has been named president - Business Development andIntegration, responsible for coordination and integration of all marketing,technology, finance, planning and business analysis, and regulatory for the aboveunits. Dinsmore's principal responsibility will be to lead an integratedapproach to the marketplace.
Now that these individuals have been named, they will begin to develop transitionplans for their respective businesses and assume their new positions on June 1.
GTE's Wireless, Directories and Airfone units will continue to report directly toGTE President Kent Foster.
"The organizations and people now in place will drive our growth in themarketplace in a powerful way," said Foster. Background on BBN
BBN is one of the nation's leading providers of Internet access and value-addedservices for businesses, with annualized revenue of more than $380 million forBBN's third quarter, announced today. It offers Fortune 1000 companies acomplete set of managed Internet services, including high-speed and dial-upaccess, systems development and electronic-commerce support, network security,and Web hosting services. BBN also provides network-related contract researchand development for government and commercial customers. BBN's Internet customersinclude many of the world's top information technology, manufacturing andfinancial services companies. BBN's home page address is http://www.bbn.com.
Background on GTE
With revenues of more than $21 billion in 1996, GTE is one of the largestpublicly held telecommunications companies in the world. In the United States,GTE offers local and wireless service in 29 states and long-distance service inall 50 states. GTE was the first among its peers to offer "one-stop shopping" for local, long-distance and Internet access services. Outside the UnitedStates, where GTE has operated for more than 40 years, the company serves over6.5 million customers. GTE is also a leader in government and defensecommunications systems and equipment, directories and telecommunications-basedinformation services, and aircraft-passenger telecommunications.
Additional information about GTE can be found on the Internet athttp://www.gte.com.
Cisco Systems
Cisco Systems, Inc. (NASDAQ: CSCO)is the worldwide leader in networking for the Internet. News and information areavailable at http://www.cisco.com.
Cisco IOS is a trademark, and Cisco, Cisco Systems, and the Cisco Systemslogo are registered trademarks of Cisco Systems, Inc. in the U.S. and certainother countries. All other trademarks mentioned in this document are the propertyof their respective owners.
