More cell phone competition seen following SBC buyout of PacTel.

DOWNTOWN L.A. - The already competitive cellular phone business in Los Angeles County will heat up even more with the proposed purchase of Pacific Telesis Group by SBC Communications Inc., said industry analysts last week.

When and if it is created, the combined new company should offer stiff competition to the two established cellular operators in county, said the analysts.

AirTouch Cellular, formerly a Pacific Telesis company, and L.A. Cellular are currently the two primary mobile phone operators in the county. Other entrants are expected in the near future using more advanced technology called personal communications systems.

The analysts said the proposed $16.7 billion deal should also give a big boost to Pacific Telesis' plans to get into the data and video transmission business in the Southland.

On the surface, however, the proposal should have no immediate impact on businesses or consumers who use Pacific Telesis services in the Southland. Pacific Telesis operates Pacific Bell, the phone company that currently provides local telephone service to about 75 percent of the county.

The deal, which requires federal and state regulatory approval, is not expected to result in any job losses in Los Angeles County, said Pacific Telesis officials. It's also unlikely the proposal will force the closure of any Pacific Telesis facilities, they said.

Pacific Telesis, with 1995 revenues of $9 billion, is headquartered in San Francisco but has a large presence in the county - about 10,600 employees. The company operates out of a regional administration office on Wilshire Boulevard in downtown Los Angeles, and has several smaller facilities throughout the area.

SBC operates telephone service in five southwestern states, as well as cellular phone operations in 61 markets in the United States. It is headquartered in San Antonio, Texas, and is the bigger company with 1995 revenues of $12.7 billion and 59,000 employees compared to 44,300 for Pacific Telesis.

PacTel name to vanish

Under the acquisition plan, the Pacific Telesis name will be dropped and the combined companies headquarters will be in San Antonio. The combined company will continue to operate its California service under the Pacific Bell name.

"Right now SBC has about the best-run cellular phone operation in the country and that is something that will directly benefit California," said Dave Otto, a telecommunications industry analyst in St. Louis with Edward Jones Co., a securities firm. Otto is also a former executive with SBC.

"Cellular phone service in Southern California is still among the most expensive in the country. This could change that," he said.

Pacific Telesis used to operate cellular phone service in Los Angeles County but spun off its operations in 1994, creating AirTouch. It has since announced its intention to get back into the cellular phone business and created a new operation called Pacific Bell Mobile Services.

Bob Barada, Pacific Telesis vice president of corporate strategy and development, said he doesn't think the proposal will accelerate the company's entry into the cellular business.

"I think what it will do is help us be more efficient in the market and help us sell our service better," he said. SBC is known for its marketing expertise, said analysts.

San Diego to get cells

As planned by Pacific Telesis, the company is expected to start offering cellular service in San Diego this summer and the rest of the state early next year.

Essentially, analysts said, Pacific Telesis brings technological expertise to the table while SBC has deep financial pockets. The combination, said that analysts, should help the new company move into the data transmission/television programming delivery business.

Because of deregulation and technological advancements, phone companies have been expanding into cable television operations and data transmission through computers. In effect, the companies want to link computers, televisions and telephones, creating a huge communications network that in the vernacular is known as the "information superhighway."

"The combination of these two companies, and what they bring to the equation, should be very good for the development of new products for both the wired and wireless network environment," said Connie Luecke, an analyst in San Francisco with Duff & Phelps Equity Research, a financial rating company.

Barada noted both Pacific Telesis and SBC have been working on developing a communications network so the effect of the proposed merger is a redoubling of those efforts.

"We're now going to have many more options to choose from in creating our network," he said.

The combination of the two organizations will create the second largest telecommunications company in the country behind AT&T Corp. The U.S. Department of Justice and the Federal Communications Commission must approve the acquisition, which is expected.