Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, June 3, 1993 TAG: 9306030110
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
In turn, the deal with British Telecommunications Plc would provide MCI expanded reach outside this country, including the difficult-to-access British market. Also it will give MCI cash to invest in its long-distance business and related endeavors.
British Telecom will pay $4.3 billion for its stake in MCI.
The two firms say they will pump $1 billion into their joint, worldwide voice, data and video communications network for multinational corporations.
Communications analysts called the venture an ideal marriage of MCI's marketing prowess with British Telecom's financial resources.
The joint venture "clearly means we will be the No. 1 world player to be reckoned with," said MCI Chairman Bert Roberts. British Telecom is fourth-largest international long-distance carrier. MCI is sixth-largest, and growing rapidly.
The largest carrier of international long-distance calls, American Telephone & Telegraph Co., complained in a statement that the deal was an attempt by British Telecom "to expand its position in the U.S. market while using its market power in the U.K. to prevent similar competition there."
AT&T, the largest carrier of international long-distance calls, and other U.S. companies have sought permission to provide service in the United Kingdom.
MCI's residential customers won't see any direct effects of the deal, though the infusion of $4.3 billion enables the company to invest in a variety of new services that will benefit consumers, said company officials.
Under the terms, British Telecom initially will purchase a 5 percent stake in MCI on Friday for $833 million. Once the final deal is approved by U.S. and British regulators, British Telecom would buy the remaining 15 percent for an estimated $3.4 billion.
British Telecom will pay an average of $64 per share of MCI stock, which was up $1.62 1/2 a share to $54.37 1/2 in over-the-counter trading.
Shares of British Telecom dropped $1.12 1/2 to $65.12 1/2 on the New York Stock Exchange.
The joint venture is expected to begin operation early next year, officials of both companies said.
Both parent companies will be distributors and marketers of global transmission services developed by the joint venture, which will include Syncordia, a company British Telecom set up in 1990 to sell international private communication links to big companies.
MCI will manage sales and distribution in the Western Hemisphere; British Telecom will do the same in the Eastern Hemisphere.
As part of the deal, British Telecom will sell its North American operation, British Telecom-North America, to MCI for $125 million.
British Telecom will own 75.1 percent of the joint venture; MCI will hold the remaining 24.9 percent. This would give British Telecom room to seek an Asian partner for the alliance if it so chose, Chairman Iain Vallance told reporters in London.
The deal gives British Telecom, once a government monopoly that has been privatized in stages since 1984, important access to the North American market, which is the world's largest.
"We have already made good progress in North America, but to fulfill our ambitions fully, we have always recognized that we need a strong American partner, not least to leave us with more freedom to concentrate our resources on Western Europe and the Pacific Rim," Vallance said. "MCI fits the bill perfectly."
In turn, MCI will gain "the financial strength of BT" to better compete in the global marketplace, said Mark Heckendorn, managing director of Versus Strategy Group Inc., a Washington-based communications consulting firm.
The announcement came a week after AT&T announced plans to form joint partnerships with Japan's largest long-distance company and Singapore Telecom to provide businesses with similar services.
by CNB