CenturyTel acquisition adds 215,000 GTE lines; consumers shouldn't notice change.

For GTE, the sale of $843.35 million in Arkansas telephone lines was a step toward trading a fragmented rural network for a chance to cash in on the telephone bills of more than a third of the country's multi-national firms.

For CenturyTel Inc., it means an exponential jump in Arkansas business through the purchase of 215,000 access lines stretching from Taylor to Piggott. Instead of having limited business in north Arkansas and Pine Bluff, Arkansas will hold the No. 2 spot in the Monroe, La., independent telephone company's 21-state portfolio of wire line and wireless service.

For Arkansas customers, say CenturyTel officials, the only change evident will appear at the top of their telephone bills when the sale closes sometime during the first quarter of 2000.

The company was expected to file documents seeking approval from the Arkansas Public Service Commission late last week, in conjunction with the documents required for reviews by the Federal Communications Commission and the U.S. Justice Department.

Industry analysts and company officials say they anticipate no government roadblocks to the sale of GTE's rural wire line properties in Alaska, Arizona, Arkansas, Iowa, Minnesota, and parts of California and Missouri.

The company announced this summer that it was selling the properties, as well as its Government Systems and Airfon units, to finance the purchase of new wireless territories and to invest "in other high-growth opportunities."

But telecommunications analysts say the Arkansas sale is part of a 1.6-million access line package that helps set the stage for GTE's proposed merger with Bell Atlantic. That deal, which encompasses basic telephone service over much of the eastern seaboard, is expected to get a closer look from the feds and regulators in 28 states.

The stakes are high, says Eileen Eastman, a commercial telecommunications analyst for The Yankee Group in Boston. Bell Atlantic's service area includes 13 states and the District of Columbia and involves basic phone service for 35 percent of the home offices of multi-national corporations based in the U.S. But the company lacks the ability to offer long-distance and other high-dollar international services.

"They currently get only 8 percent of the total spend of the multi-national companies in their service area," Eastman says.

Past mergers involving GTE, AT&T and other large providers left the companies with fragmented, often remote telephone networks that suddenly have become plums for the industry's independents, which are trying to consolidate regional systems for wire line and wireless packages.

CenturyTel Inc., which began as an independent telephone company in 1930 and incorporated in 1968, is the nation's ninth largest local exchange telephone company in terms of access lines and the 10th largest cellular company, based on population equivalents.

With 2 million wireline customers and 1.2 million wireless customers, CenturyTel is attracting national interest, says David Hager, a telecommunications analyst with A. G. Edwards & Sons Inc. in St. Louis. So is GTE's national garage sale for rural telephone access.

"GTE has been selling off rural exchanges throughout the country ... and there's been a fair amount of interest by CenturyTel, the independents and even some of the start-up companies," he says.

CenturyTel announced its definitive agreement to purchase all of GTE's local exchange properties in Arkansas on June 29. On July 8, the company launched a joint venture with Georgia-based Spectronics Corp., and Local Exchange Carriers L.L.C., an equity investment firm out of Kansas City, Mo., to buy GTE's 116,000 access lines in Missouri.

Patricia Cameron, CenturyTel's vice president of public relations, says the number of lines involved in the Arkansas sale will climb to 230,000 by the time the deal closes. It also will allow the company to overlap traditional phone service with its wireless service throughout south Arkansas.

The deal does not affect GTE long-distance services. But it affects 289 GTE employees, who will have a new employer.

"It's a real good strategic fit. Once we complete the purchase, we'll have 275,000 telephone access lines and Arkansas will be the second largest state behind Wisconsin," she says.

She says company access lines don't equate with customers, who may pay for two or more access lines in a household.

CenturyTel has long provided service through 44,000 access lines in and around Mountain Home, Hardy and Mammoth Springs.

The purchase expands the customer base in the northeast tip of Arkansas, provides a new base in the small towns around Bentonville, Alma, Fort Smith and Russellville, and builds a brand new customer base in east Arkansas stretching from Pleasant Plains on the north in Independence County to Tillar in Desha County on the southern tip of the new service area.

Like its giant Arkansas-based competitor, Alltel, the Louisiana company is acquiring licenses to bundle its package of wireless and wire line services with auxiliary, digital offerings such as caller ID, three-way calling, call return, and long distance.

"That may mean forming agreements with other companies to do enhanced service," she says.

CenturyTel must file a tariff schedule as well as outline its plans to the PSC, although Cameron says the customers will never notice the difference. Acquisitions, she says, are standard operating procedure. CenturyTel nearly doubled its size with the $2.2 billion purchase of Pacific Telecom Inc. in 1997.

On July 27, the company announced a 7.3 percent increase in revenues for the second quarter to $416.8 million and 23.7 percent increase in net income to $61.2 million. In the process, CenturyTel's long-distance customer base climbed above 250,000 for the first time in the company's history.

GTE also posted a 7 percent increase in consolidated revenues to $6.3 billion during the second quarter. GTE spokeswoman Briana Gowing says GTE has signed an agreement to sell 1 million of the 1.6 million rural access lines it proposed to market. She says the company estimates after-tax profits of $2 billion to $3 billion on the total package of access lines.

She says consolidation - not money to finance the company's mega-merger with Bell Atlantic - is GTE's prime objective.

"It makes more sense strategically to consolidate into adjoining areas because the manpower's there and the equipment's there," Gowing says. "That's probably the biggest part."