Chapter 364: Exclusive Deal

San Francisco.

In a villa nestled in the hills of Woodside, on the western outskirts of Palo Alto.

Dawn was just breaking. Sensing movement at his side, Simon Westeros instinctively reached out, drawing a slender waist into his embrace.

Jennifer, who was just about to slip on a tank top, was pulled close to Simon's chest. Knowing how much he enjoyed this closeness, she did not resist and snuggled for a moment before coaxing him gently, "Can you let go, please? I'll make breakfast, and then I need to head back to work."

Last night, after attending a cocktail party hosted by MCA's Chairman, Lou Vassarman, Jennifer, originally declining, was still persuaded by Simon to come to San Francisco.

Simon's hand wandered over Jennifer as he spoke, "Stay with me a bit longer. Alison and the others will prepare breakfast."

"But I want to make it for you myself."

"Alright then."

Acknowledging Jennifer's insistence, Simon reluctantly let go and watched as she dressed and walked towards the bathroom. He soon sat up himself.

In the early '90s, the Woodside hills were not as bustling as they became after the advent of the internet era. In late August, the area still thrived under a Mediterranean climate.

Jennifer was in the kitchen preparing breakfast while Simon changed into sportswear and left the house for a jog on the sparsely populated, tree-lined asphalt roads of the hills.

Such unrestricted freedom was rare for Simon, who usually lived near the densely populated Malibu where every move was closely watched. On a regular basis, he could only work out in his home gym, and the situation was even more pronounced if he was in New York.

While jogging, a black Mercedes slowed down and approached. The window rolled down, and a middle-aged man spoke through it to Simon, "Buddy, there are two people behind you…" Before he could finish, he recognized Simon, both surprised and uncertain, he asked, "You are, uh, Simon Westeros?"

Realizing the man was kindly warning him about being followed, Simon stopped and nodded with a smile, greeting, "Good morning."

His two bodyguards, jogging with him, quickly caught up, more alert.

Realizing his faux pas, the middle-aged man stepped out of the car to greet Simon. He was a senior executive at Oracle and left a business card before departing. Simon handed the card to Neil Bennett following behind him and continued his jog. Ten minutes later, he returned home where Jennifer had already prepared breakfast.

The breakfast was served by the two of them, without the help of the AB girls accompanying them.

During breakfast, Jennifer brought up the cocktail party from the previous night, "Vassarman has noticed our strategy. What's your plan moving forward?"

At last night's cocktail party, Lou Vassarman was upfront about his awareness of Simon's plans to acquire MCA and even shared some details about Panasonic's negotiation progress with MCA, openly welcoming Daenerys Entertainment and Panasonic to join the bidding for his company.

Simon, of course, wasn't going to immediately join the acquisition talks as Vassarman wished, and merely played along for the time being.

Hearing Jennifer's comment, Simon said, "Do you remember the proposal from America Online last month, aiming to buy out the internet services of Bell Atlantic, Bell Pacific, and NYNEX?"

From the famous AT&T breakup in 1983, the once monopolistic Bell System was split into the long-distance provider AT&T and seven regional Bell operating companies. Simon was referring to three of these, which were central to America Online's plans on the East and West Coasts.

Currently, aside from a few of its own lines, America Online mostly had to lease lines from the traditional Bell network.

With increasing optimism about the future of the internet industry, Steve Case had submitted a proposal to Simon at the end of last month. He hoped to buy exclusive internet access rights from Bell Atlantic and the others, paying them a fee annually, which would not only prevent other internet service providers from entering America Online's territories but also ensure more support from these operators in internet access services.

If the executives of the three regional telecom companies were as forward-thinking as Simon, they would never agree to America Online's proposal.

Given the internet industry's nascent stage in America and America Online's modest user base of just over a hundred thousand, these numbers were insignificant to the traditional telecom giants. If they could secure additional revenue by selling off platform rights, why wouldn't they?

Thus, all three companies showed interest in Steve Case's proposal.

However, the specific terms of cooperation had been a tug of war for a month, with no agreement reached.

The companies argued that since America Online wanted to buy out their network lines, it should pay based on total users, not just internet access users as America Online had suggested.

America Online was willing to pay $20 per user per year to the

 three companies. Based on America Online's total of 150,000 users in August, the annual payment would amount to just $3 million.

While $3 million was not a lot, considering the rapid growth of America Online's user base in recent months, this figure could become significant in a year or two.

On the other hand, under the companies' plan, although they were willing to lower the per-user fee to one-tenth of America Online's offer, i.e., $2, multiplied by nearly 20 million users across the states on the East and West Coasts, America Online would need to pay an enormous $40 million per year right from the start.

Moreover, the companies wanted the right to renegotiate the contract every two years during the term.

Given that America Online's total valuation was less than $100 million when Westeros Corporation injected capital to take control earlier, it was clear that the companies' bold demands were influenced by Simon's backing.

Jennifer clearly remembered this matter and nodded, "I think if Bell Atlantic and the others could lower the per-user fee to $1, it would be more cost-effective to pay based on the total number of users. But, how does this relate to our acquisition of MCA?"

Simon explained, "My previous plan was, once America Online reached a certain scale and federal telecom regulations loosened, to have America Online initiate acquisitions of these traditional operators. Remember my idea of integrating the three networks?"

"The Telecommunications Act issued during the 1984 AT&T breakup limits long-distance, regional phone, and cable companies from entering each other's markets. It would be very difficult to get the federal government to lift these regulations," Jennifer proficiently explained, then realizing Simon's intent, said, "Are you planning to start acquiring traditional operators now?"

"Bingo," Simon lightly tapped his fork on the plate, "You can start gathering information on these three companies today when you go back, including their market value, operational status, management details, and industry-related legal documents. And remember, keep it confidential."

"I'll take care of it personally," Jennifer nodded, "But, we'll likely need to raise a substantial amount of money. And buying all three companies at once isn't possible. Which one do you plan to target?"

"Bell Atlantic," Simon blurted out.

It was financially and legally impossible for the current Westeros system to swallow all three companies at once.

Among the three, Bell Atlantic was Simon's true target.

Bell Atlantic, later becoming the second-largest telecom operator in America after AT&T as Verizon, was also located in the densely populated regions of Pennsylvania, New Jersey, Washington D.C., and Virginia, covering more than a fifth of the U.S. population.

Of course, Bell Atlantic also had the highest market value among the three.

Even amid the stock market downturn caused by the Gulf War, it had closed the previous week with a market cap of over $5.6 billion.

Considering a 30% acquisition premium, Simon would need at least $8 billion to secure Bell Atlantic. Including the $7 billion prepared for MCA, Simon would need to mobilize a total of $15 billion, most of which would have to be obtained through loan financing.

The massive Reynolds Nabisco acquisition completed at the beginning of last year had turned into a disaster eighteen months later, and following the debt crisis at the end of last year, there had been few corporate mergers over $1 billion.

Simon's planned dual acquisition strategy would definitely ignite federal media once news spread.

If there were enough time, Simon would prefer a more measured approach.

However, it was a particularly low economic period in America during the '90s. Once the United Nations forces swiftly resolved the Gulf War next year, the federal economy was expected to rebound quickly. By then, acquiring Bell Atlantic could cost over $10 billion and potentially attract competitors.

Looking further ahead, if Simon waited until the peak of the '90s tech boom to expand America Online according to his original plan, the large-scale acquisitions involving hundreds of billions would face more than ten times the governmental obstacles than at present.

With plenty of capital currently available, it was undoubtedly the best choice to begin Westeros Corporation's expansion in the telecom sector ahead of schedule.

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