GTE Corp. is cutting back in the expensive and competitive business of building telephone network switches by turning over 49 percent of its operation to American Telephone & Telegraph Co. GTE will own 51 percent of a joint venture with AT&T, then reduce its ownership to 20 percent after five years and zero after 15 years, under an agreement in principle announced by the companies Wednesday. The venture will consist of GTE's network switching business, which employs about 2,000 workers in the Phoenix, Ariz., area and about 3,000 in factories in the Chicago suburbs of Northlake and Genoa, Ill. AT&T will give the joint venture licenses to use some of AT&T's own advanced switching technology. It will continue to run its own network switching business independently of the joint venture. AT&T dominates the U.S. market for network switches, which are basically computers installed in the central offices of phone companies that are loaded with complex software to handle high-tech communications. The newest switches are being upgraded at enormous expense to handle simultaneous transmission of voices, computer data, video signals and other information over the same circuits. The deal eases GTE out of a costly business where it has been an also-ran with about 10 percent of the market, consisting mainly of the GTE local phone companies, said John Bain, an analyst for Shearson Lehman Hutton Inc. Financial arrangements were not disclosed, but since GTE's contribution is substantially larger it is reasonable to assume that AT&T will be making some kind of payment to GTE, GTE spokesman Thomas Mattausch said. GTE's customers should benefit because the joint venture will work on enhancing GTE switches using the latest in AT&T technology, the companies said. The companies' switches happen to be similar, so there is plenty of room for sharing of technology, Mattausch said. In the long term, AT&T is likely to steer GTE customers toward AT&T switches, Bain predicted. GTE has reduced its involvement in other parts of the communications equipment business in recent years by entering joint ventures with West Germany's Siemens AG and Japan's Fujitsu Ltd. ITT Corp., following a similar pattern, reduced its involvement in the network switching business at the end of 1986 by placing its telecommunications equipment business in a European-based joint venture with France's Compagnie Generale d'Electricite.
