Analysts said BT, to be renamed Concert when the merger with MCI is completed on 1 January, would soon be given the opportunity to take up an option to buy 10 per cent of Telefonica's lucrative international subsidiary. The company, called Tisa, owns stakes in several Latin American phone companies in a market forecast to almost double in size to $60bn by 2000.
BT shares fell a further 9p yesterday to 404.5p, as investors continued to digest the detail of its revised pounds 11bn takeover bid for MCI, which knocked more than pounds 3bn off the purchase price. BT's big UK shareholders were unhappy at the lack of any "escape" clause allowing the company to back out of the new agreement, along with the $750m which BT will have to pay MCI if investors reject the deal.
BT and MCI announced their alliance with Telefonica in April, scoring a coup by prising the Spanish group out of the rival Unisource alliance controlled by AT&T of the US. The deal included BT taking a 2 per cent stake in Telefonica, which bought 1 per cent of BT.
Tisa is the biggest phone operator in Latin America, with communications companies in Argentina, Brazil, Chile, Peru and Puerto Rico. James Downey, from stockbrokers ABN Amro Hoare Govett, valued Tisa at $5.2bn. "If the deal goes ahead it would be good for BT, with a more direct input into Latin America."
Speculation has mounted in Spain about a possible deal, after the government agreed to sell its remaining 23.8 per cent stake in Tisa to Telefonica, giving the Madrid group full control. The shares are expected to be handed over within weeks, allowing Telefonica to offer stakes in Tisa to outsiders, a move would help reduce Telefonica's $13bn of debts.
Approaches to buy stakes in Tisa are thought to have come from neighbouring Portugal Telecom and Citicorp, the US banking giant.
Next month Telefonica will confirm that John Reed, head of Citicorp, has joined Tisa's board as non-executive vice-president, fuelling rumours of closer co-operation.
If Telefonica does agree to sell stakes in Tisa to outside bidders, it would trigger the 10 per cent option currently held by MCI, which will transfer to Concert after the merger.