Pacific Telesis Group on Friday completed its $429-million purchase of Communications Industries, a deal that makes the telephone carrier the nation's first to provide government-sanctioned cellular and paging services outside of its primary territory.
The purchase of the Dallas-based company is Pacific Telesis' first major acquisition since its spinoff from AT&T in January, 1984. Completion of the deal came just hours after the state Public Utilities Commission gave its approval and after the company settled a last-minute lawsuit by the U.S. Department of Justice challenging a minor portion of the merger.
The acquisition, which Pacific Telesis had fought to complete since last May, gives the company much-sought-after cellular telephone and paging franchises in San Francisco, Georgia, Texas, Missouri, Kentucky, Arizona and Florida. Pacific Telesis' cellular subsidiary, PacTel Mobile Access in Costa Mesa, already is the nation's largest cellular provider with about 50,000 subscribers in Los Angeles, Orange, Riverside, San Bernardino, San Diego, Ventura and Sacramento counties.
Pacific Telesis officials have called the purchase "the single most important success of our diversification program" and have promised that the company intends to become a nationwide provider of cellular and other "personal communication" services. The company's Pacific Telephone subsidiary provides local telephone service to about 22.5 million customers in Nevada and California.
Before the purchase was finally signed at noon Friday, it required approvals from Judge Harold H. Greene, who presided over the divestiture of AT&T, the U.S. Department of Justice, the state Public Utilities Commission and the Federal Communications Commission.
Just hours before the deal was to close, Justice Department lawyers and company officials settled the final antitrust issues pertaining to the merger. Government attorneys questioned whether the merger would give Pacific Telesis unfair access to trade data on its major competitor in the Los Angeles cellular region.
Among Communications Industries' holdings is a small interest in the Dallas-Forth Worth system that is managed by LIN Cellular Communications of New York. However, LIN is also a large investor in the second cellular franchise in the Los Angeles area.
Justice Department attorneys said they were worried that Pacific Telesis could acquire information from LIN in Texas that it could use to weaken its competitor in Los Angeles. A consent decree signed Friday morning strictly limits Pacific Telesis' access to information about the Texas operation.
"We didn't agree with them," said Pacific Telesis attorney Paul White, "but given the 11th hour, we agreed to the consent decree."
The Federal Communications Commission has awarded two cellular service franchises in each of 90 regions throughout the country, following a competitive review. In all cases, one franchise goes to a telephone service provider and the second to a non-provider.
Although three other of the seven regional telephone companies have branched out of their service areas with cellular operations over the last year, the moves were not approved by the federal regulators, and Greene has ordered the companies to halt their operations until they receive the required permission.
However, Justice Department attorneys on Friday asked Judge Greene to approve the sale of Communications Industries' cellular franchise in San Diego to a subsidiary of U.S. West, the telephone operator in 14 Western states.