In less than a month, Bell Atlantic Co., the company that provides telephone service to customers in six states and the District, has been chosen to operate phone systems in three foreign countries, opening a new chapter for what has become the most internationally minded of the Baby Bells.
This week, Bell Atlantic's international subsidiary, in conjunction with New York banking giant Manufacturer's Hanover Trust, was chosen to operate the northern half of Argentina's state-owned phone system, which now generates meager profits and offers the spotty service and technology last seen in most U.S. cities in the 1950s.
Less than two weeks ago, Bell Atlantic took over the entire telephone system of New Zealand, in a $2.4 billion venture with fellow Baby Bell company, Ameritech. In another venture, Bell Atlantic will join with US West and the Czechoslovak Ministry of Posts and Telecommunication to build cellular mobile and packet data networks in Czechoslovakia.
In the Argentina deal, the company is going into the venture on a management basis only. Bell Atlantic will not infuse any capital, but will get a stake in the company in return for its management services. The capital needed to upgrade the country's 40-year-old phone system will be provided by Manufacturers Hanover and several Argentina-based companies.
Although the firm has not yet drafted its program for rehabilitating the phone system, it will probably send a team of between 30 and 40 of its own managers to South America to serve in "key positions." There they will work with the existing management of Entel, as the Argentina system is known. Jack Baird, director for international corporate relations for Bell Atlantic, said the firm hopes that "over time, we will reduce the position of Bell Atlantic in the company."
The Argentina phone system is reputed to be one of the worst in South America. New customers wait years to get a phone; old customers wait months for repairs. At hours of peak demand it can take five to 10 minutes to get a dial tone. Some exchanges in metropolitan Buenos Aires simply cannot be made to contact other exchanges.
One reason for the poor service is the technology. Argentina has a very old central switching technology, with 25 percent of the machines using the step by step method or the electro-mechanical technology, which was commonly used by most American phone companies during the 1940s and '50s. There are, however, a few computerized machines in Buenos Aires, Argentina's capital.
Despite poor services and financial difficulties -- Entel lost more than $1 billion in 1984 -- the system experienced a modest turnaround in 1987, the last year for which figures were available, showing a modest profit of some $189 million.
Baird said Bell Atlantic is looking to improve service with existing machinery even as new technology is gradually installed. One of its first tasks will be to draw up cost estimates for the eventual modernization.
Any definite planning will have to be delayed until the government of Argentina completes the division of assets, personnel and managers of Entel. Under its new privatization plan, the Argentine firm will be broken into two companies -- Telco North and Telco South. Citibank, with Telefonica of Spain, won the bidding for the ownership of Telco South.
Bell Atlantic will still have to negotiate with Manufacturers Hanover and the Argentine companies on compensation. One of the stumbling blocks will be determining how the American firm will be paid because the local currency, the austral, is rapidly declining in value. Baird said the "company is hopeful that there will be built-in incentives" such as higher management fees with improvements in the phone company's services and finances in the contract.
With the three international ventures announced this month, Bell Atlantic appears bent on increasing its stakes outside the United States. The court order that spun off the seven Baby Bells from the monopoly Bell telephone system in 1984 bars them from three lines of business: offering long-distance service, manufacturing telephone equipment and providing computerized information services over telephone lines.
Baird said Bell Atlantic's desire to focus on growth outside of the country was "financially and strategically driven." He mentioned increased "opportunities in world technology with the lifting of the Iron Curtain, and significant growth in the Pacific Rim nations." Because of these developments, the firm has ventured into Europe and the Pacific region.
Although international ventures have not yet translated into big increases in employment at Bell Atlantic, headquartered in Philadelphia, Baird said it has prompted the company to change the way it does business, adapting to different cultures and currencies.
The Manufacturers Hanover group's bid for the Argentine system represents a major swap of Argentine debt for equity in Argentine business. It included $100 million in cash and tender of Argentine debt and accrued interest with a total face value of some $2.3 billion.
Bell Atlantic will get a 4.9 percent equity in the investment company that will own 60 percent of Telco North in exchange for its management services.