$4bn telecom link-up plan

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France Telecom and Deutsche Telekom yesterday confirmed plans to spend up to US$4.2bn for 20 per cent of Sprint, the US long-distance company, as part of a long-term strategy to forge a global telecommunications alliance.

The announcement drew immediate fire in Washington and Brussels, where regulators are reviewing a previously announced link between the two European telecoms companies to trade under the name Atlas.

The US Federal Communications Commission and the Department of Justice are both expected to place the transatlantic deal, dubbed Phoenix, under close scrutiny, following complaints from other companies that France Telecom and Deutsche Telekom operate in protected markets where foreign companies are prohibited from competing freely.

In Brussels, meanwhile, sources at the Competition Directorate reiterated worries about the link between the two companies, citing the still heavily regulated domestic markets and concerns that their Atlas alliance would lead to less competition for business data services in France and Germany.

BT, a long-time critic of the Franco-German telecoms alliance, predicted that US regulators would reject the deal.

"It is absolutely meaningless," a spokesman said. "If the Department of Justice and the FCC treat this as they treated the BT deal with MCI, it will not happen." BT has a pounds 1bn alliance with the long-distance operator MCI, which was itself scrutinised by regulators to ensure that the partners' home markets were open to competition.

The European Commission has already asked the companies to alter terms of their European alliance and is withholding approval until it receives further assurances. There is also concern that France and Germany have yet to confirm concretely their commitment to telecoms deregulation by the target date of 1 January, 1998. The Commission is expected to insist that more progress be made in exchange for its approval of Atlas.

Commission sources said yesterday that Brussels was also awaiting formal notification of the terms of the Phoenix venture, and would make a formal statement today.

Under the link with Sprint, Deutsche Telekom and France Telecom would benefit from US help in markets outside the US and Europe, where the three companies plan to operate together. There are no present plans to operate within the home markets of the partners.

The link is the latest in a line of telecoms alliances, including BT's joint venture with MCI, called Concert, to provide global communications for big business. BT has also forged alliances with European operators such as Viag of Germany, Albacom of Italy and Banco Santander in Spain, as well as big operators in Scandinavia.

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