Baby Bells on alert for dollars 1bn invasion by MCI

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The Independent Online
SHARES in MCI Communications Corporation, in which British Telecom is to buy a 20 per cent stake, rose dollars 1.25 to dollars 26.75 yesterday on reports that the long-distance carrier is planning to build its own local telephone networks in big US cities to bypass local phone firms.

The project would involve an investment of more than dollars 1bn, but this would be comfortably covered by the dollars 4.3bn MCI will receive under the BT agreement announced last June.

That deal is due to close in the middle of next year, pending regulatory approval.

The MCI plan, reported in the Wall Street Journal, would be a direct attack on the Baby Bells' home turf and another important move in the restructuring of the US telephone and cable television industries, as new alliances are formed and companies try to move in on each others' businesses. MCI had no comment on the report.

MCI depends on regional Baby Bells to connect its long-distance calls. A call from New York City to Los Angeles is connected to MCI at either end by Nynex and Pacific Bell respectively.

By installing its own networks in most big cities, MCI could cut out connection fees and increase its revenue per call dramatically.

The main target would be large corporate customers in downtown business districts - some of the most valuable clients of the regional Bells.