BT backs Germans to buy Mercury


Deutsche Telekom, the giant German telecoms group, is British Telecommunications' preferred buyer for Mercury Communications, the UK's second-biggest telephone company, following any merger with Cable & Wireless, Mercury's parent.

BT believes that bringing in Deutsche, which is to be privatised later this year, would open up the British telephones market to real competition for the first time. It would also ease the pressure from the regulator, Oftel, which has caused BT's recent share price to underperform the market drastically.

The Mercury sell-off, along with the disposal of C&W's Mercury One-2- One mobile telephones operations, will almost certainly be forced on BT by government competition rules, if a merger goes ahead. But BT, to which Peter Bonfield of ICL recently moved to become chief executive, will be in a strong position to dictate terms if a pounds 35bn merger with C&W can be consummated. The Government is said to have given "more than a nod and a wink" to the deal as part of a desire to have a strong UK champion in the telecommunications industry.

Observers say it is ready to use its golden share to block any foreign takeover of C&W, which is putting pressure on the group to reach agreement with BT.

Adding to that pressure is the continued failure of C&W to find a new chief executive. The group, which has been rudderless since both its former chairman, Lord Young, and chief executive, James Ross, were ousted last year, is said to have lined up an American to fill the top executive post, but he will not move until the outcome of the merger talks is clear.

The sale of Mercury to Deutsche would give the British group a well capitalised parent which, like BT, is having to make a rapid transformation from state- owned to private sector operator. Deutsche, which is due to float in a pounds 7bn privatisation later this year, has been interested in picking up Mercury for some time. BT's chairman, Sir Iain Vallance, maintained close links with Helmut Ricke, the German group's chairman until his resignation in 1994. Sir Iain gave advice on the privatisation and in the course of many discussions the subject of a possible deal between BT and C&W was raised, leading to Deutsche's initial interest in Mercury.

The possibility was revived last year when a BT executive made a courtesy call on Deutsche in December, and again within the past fortnight.

But Deutsche will not have the field all to itself. AT&T, the US telecoms giant, and Nynex, a US "baby bell" which owns the second-largest cable operator in the UK, are being seen as serious rival bidders. AT&T has already held discussions with C&W over Mercury, but the price demanded was too high.

US West, C&W's partner in the Mercury One-2-One mobile telephone operation, has right of first refusal over the British group's 50 per cent stake, valued at around pounds 800m by analysts.

At present the talks between BT and C&W are only being conducted through merchant banking advisers - Rothschilds for BT, Goldman Sachs and ING Barings for C&W - and the two sides stress that they are in no hurry to complete a deal.

A BT spokesman yesterday refused to comment, beyond saying that reports the company was ready to sell Mercury to a US consortium of investors were "without foundation". However, the Independent is aware that a buying group has been put together and has made an approach for the company.

ebooksAn evocation of the conflict through the eyes of those who lived through it
Roger Federer is greeted by Michael Jordan following his victory over Marinko Matosevic
tennisRoger Federer gets Michael Jordan's applause following tweener shot in win over Marinko Matosevic
peopleJustin Bieber accuses paparazzi of acting 'recklessly' after car crash
Arts and Entertainment
Oppressive atmosphere: the cast of 'Tyrant'
tvIntroducing Tyrant, one of the most hotly anticipated dramas of the year
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Client Services Executive / Account Executive - SW London

£23000 - £26000 per annum: Ashdown Group: Account Executive / Client Services ...

PA to CEO / Executive Secretary

£36000 - £38000 per annum: Ashdown Group: Executive PA to CEO & Executive Dire...

Generalist HR Administrator, Tunbridge Wells, Kent - £28,000.

£25000 - £28000 per annum: Ashdown Group: Generalist HR Administrator - Tunbri...

Senior C# Developer (.NET, C#, JMS, TDD, Web API, MVC, integrat

£45000 - £75000 per annum + benefits+bonus+package: Harrington Starr: Senior C...

Day In a Page

Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?
Rachael Lander interview: From strung out to playing strings

From strung out to playing strings

Award-winning cellist Rachael Lander’s career was almost destroyed by the alcohol she drank to fight stage fright. Now she’s playing with Elbow and Ellie Goulding
The science of saturated fat: A big fat surprise about nutrition?

A big fat surprise about nutrition?

The science linking saturated fats to heart disease and other health issues has never been sound. Nina Teicholz looks at how governments started advising incorrectly on diets
Emmys 2014 review: Can they genuinely compete with the Oscars

Can they genuinely compete with the Oscars?

The recent Emmy Awards are certainly glamorous, but they can't beat their movie cousins
On the road to nowhere: A Routemaster trip to remember

On the road to nowhere

A Routemaster trip to remember
Hotel India: Mumbai's Taj Mahal Palace leaves its darker days behind

Hotel India

Mumbai's Taj Mahal Palace leaves its darker days behind
10 best pencil cases

Back to school: 10 best pencil cases

Whether it’s their first day at school, uni or a new project, treat the student in your life to some smart stationery
Arsenal vs Besiktas Champions League qualifier: Gunners know battle with Turks is a season-defining fixture

Arsenal know battle with Besiktas is a season-defining fixture

Arsene Wenger admits his below-strength side will have to improve on last week’s show to pass tough test
Pete Jenson: Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought

Pete Jenson: A Different League

Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought
This guitar riff has been voted greatest of all time

The Greatest Guitar Riff of all time

Whole Lotta Votes from Radio 2 listeners
Britain’s superstar ballerina

Britain’s superstar ballerina

Alicia Markova danced... every night of the week and twice on Saturdays
Berlin's Furrie invasion

Berlin's Furrie invasion

2000 fans attended Eurofeurence
‘It was a tidal wave of terror’

‘It was a tidal wave of terror’

Driven to the edge by postpartum psychosis