BT starts fight to win over US shareholders

British Telecom is to launch an unprecedented marketing campaign in the US in an attempt to convince sceptical American investors about the merits of its planned pounds 13bn merger with long-distance carrier MCI, before crucial shareholders' votes on both sides of the Atlantic next month.

At a series of road-shows for the US investment community over the next few weeks, BT will seek to head off any moves by shareholders to sell their stock immediately after the merger is completed, risking a downward spiral in the price. BT has claimed the tie-up will boost the two sides' profits by pounds 500m in five years through improved global marketing and savings on equipment procurement.

Under the terms of the deal, existing MCI shareholders will get 5.4 shares in BT - which will be renamed Concert after the two companies' business communications joint-venture - and $6 per share in cash. US investors are to vote on the merger at MCI's annual meeting on 2 April, while more than 2 million BT shareholders will be asked to approve the deal at an extraordinary general meeting at Wembley Arena on 15 April.

James Ross, telecoms analyst at stockbrokers Hoare Govett, explained: "There's obviously going to be some stock flowing back from the US because investors there won't want to keep it. The merged company won't sit so easily in their portfolios because it will clearly no longer be a domestic organisation."

The scepticism explains BT's plans to get permission to buy back up to 10 per cent of its shares immediately following the merger, which is due to be completed on 1 October. The move would enable BT to mop up any Concert stock dumped in the US. Shareholders will be asked to endorse the buy- back at the EGM in April.

What worries US shareholders most is that MCI's famously aggressive marketing-led culture, sharpened through bitter battles with arch-rival AT&T, will be swamped by BT's background as a bureaucratic, state-owned monopoly. Though MCI's domestic US business will continue to be run mostly independently from BT, investors suspect the UK management will exert a growing influence.

Moves by British executives to end MCI's long-standing policy of rewarding staff with generous share options is the most obvious example of the looming culture shock. MCI's annual report, filed this week, shows that options worth $195m (pounds 121m) were issued to staff in 1996, up from $167m the year before. Insiders estimate the merger will create at least 200 MCI millionaires.

Mark Lambert of NatWest Securities summed up the problem: "Concert will be a very different vehicle from MCI. It'll have lower growth than the American business and be less highly motivated managerially. If MCI has a fantastic year, it all gets diluted if BT merely has a good year."

The gap in growth prospects from the two companies' traditional markets is also yawning. In the nine months to December BT's turnover grew by 4.3 per cent to pounds 11.13bn. MCI's annual revenues in 1996 grew by 21 per cent to $18.5bn. It is hardly surprising that investors are sceptical about BT's claim that the deal will enable both companies to grow more quickly.

Conversely, British investors are having to get to know a lot more about MCI, which many regard as having historically put risk before reward. At the first analysts' road-show in Washington this week, MCI said it was considering accelerating its push into the $100bn-a-year US local telephone market as competition is gradually introduced. A 1996 law will progressively end the monopoly of local phone companies, the so-called Baby Bells, which were split off from AT&T in 1984. The changes will also allow regional operators to compete with MCI in the long-distance market for the first time.

So far MCI has pledged to invest $1bn in building local fibre-optic networks, of which some $600m will be spent this year. However Nate Davis, senior vice president of local markets, said investment could be pushed much further and brushed off the threat from the regional operators in the long-distance market. "They are going to be spending their time protecting their market share. We are going to be spending our time taking market share as an attack organisation."

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Joe Cocker performing on the Stravinski hall stage during the Montreux Jazz Festival, in Montreux, Switzerland in 2002
musicHe 'turned my song into an anthem', says former Beatle
News
Clarke Carlisle
sport
Sport
footballStoke City vs Chelsea match report
Arts and Entertainment
theatreThe US stars who've taken to UK panto, from Hasselhoff to Hall
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
News
newsIt was due to be auctioned off for charity
News
Coca-Cola has become one of the largest companies in the world to push staff towards switching off their voicemails, in a move intended to streamline operations and boost productivity
peopleCoca-Cola staff urged to switch it off to boost productivity
Environment
Sir David Attenborough
environment... as well as a plant and a spider
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there