BT paying dollars 4.3bn for stake in US operator: Partners in 'telecommunications deal of the century' will offer their services to businesses worldwide

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The Independent Online
BRITISH Telecommunications is to pay dollars 4.3bn ( pounds 2.79bn) for a 20 per cent stake in MCI Communications, one of the largest long-distance telephone companies in the US. The acquisition, the biggest in BT's history, was yesterday dubbed by MCI the telecommunications deal of the century.

BT and MCI will also form a joint- venture company to offer private telecommunications services to businesses across the world, investing about dollars 1bn. BT will own 75 per cent of the company with MCI holding the balance, although other partners from the Far East may be included later.

Iain Vallance, BT's chairman and chief executive, said: 'This alliance aims to break into what is de facto a cartel between monopoly operators in the rest of the world.'

Although the Government is only weeks away from the pounds 5bn sale of the rest of its shares in BT, it was not consulted before the MCI agreement. Mr Vallance said he expected ministers to welcome the move as it was in the national interest.

The news followed months of speculation over BT's intentions in the US. The group has already agreed to sell its 20 per cent stake in McCaw, one of the largest cellular telephone companies in the US, to AT&T for dollars 1bn. BT was earlier this year rumoured to have been in talks about taking a stake in EDS, the communications subsidiary of General Motors.

BT has applied to become a US telecommunications operator in its own right but has run into opposition from American companies including AT&T. The British group said it would continue with its licence application, which is now before the Federal Communications Commission.

However, Michael Hepher, BT's group managing director, said: 'Clearly, if this deal (with MCI) happens we will feel our ability to deliver in America will be taken care of in a very decisive fashion. We can then turn our attention to Europe.'

BT had until now given the impression that it was interested in taking only controlling stakes in other companies, but US regulations limit foreign companies' investments in telecommunications firms to 25 per cent of voting power. Mr Hepher said: 'What we have to do is work within the realities.'

BT will pay dollars 830m for an initial 5 per cent of MCI, taking the stake to 20 per cent once regulatory approval has been obtained. The deal is expected to be completed early next year. BT's dollars 4.3bn cash investment represents a payment of dollars 64 per MCI share, a premium of about 20 per cent on the market share price.

MCI, meanwhile, will take over the operational assets of BT North America - largely comprising the Tymnet data services company - for its book value of about dollars 135m.

The joint venture between BT and MCI will eventually absorb BT's existing global communications plans. These include two large projects - the Syncordia private network business and Cyclone, the infrastructure project intended to underpin BT's global services for multinationals.

BT was expected to invest up to dollars 1bn in the worldwide private network business, expected to be worth dollars 5bn by 1996. Mr Hepher said: 'The new company will give us a much faster and more efficient route to success in the global telecoms market.'

The products offered by the BT- MCI venture will include voice, data, video and multi-media services. They will be jointly branded but MCI will market them in the Americas while BT will cover the rest of the world.

The joint venture cannot offer basic public telephone services as these are covered by international covenants. However, Mr Vallance said that should the current international regime collapse or change, 'we will be in a good position to deal with it'.

BT shares fell 5p to 421 1/2 p.

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