BT's hunt for a US partner is still on

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The Independent Online
BRITISH TELECOM yesterday reaffirmed its commitment to finding a partner in the United States following the collapse of its merger with MCI, the US long-distance operator, last year.

"The US is very important to us," Sir Iain Vallance, BT's chairman, said. He added that although prices of US telecom operators had been pushed up by recent mega-mergers this would not stop BT from looking for a suitable partner with which to enter into a merger, joint venture or strategic alliance.

Sir Iain said BT was currently talking to "a number of potential partners" though he stressed it could be several years before a deal is agreed. BT is prevented from linking up with other partners until MCI's merger with WorldCom, the US group, is approved by regulators, triggering a $7bn (pounds 4.2bn) cash payment to BT in return for its 20 per cent stake in MCI

Sir Iain was speaking as BT reported flat pre-tax profits of pounds 3.2bn for the year to March. The group said start-up costs in continental Europe and increased interest charges resulting from the 35p special dividend paid earlier this year had held back growth in profits.

Robert Brace, finance director, said he expected European losses to peak at pounds 300m this year. BT has been investing heavily in fixed and mobile telecom interests in countries such as Germany, the Netherlands, Italy and Switzerland. It now has 16 such licences - more than any other operator.

Sir Peter Bonfield, chief executive, said the group was well-placed to take advantage of opportunities in its core business as well as new areas such as multimedia, the internet and mobile phones.

Meanwhile, BT moved a step closer to being allowed to take part in British Interactive Broadcasting (BiB), its joint venture with British Sky Broadcasting, after it made promises to the European Commission about its role in the business.

BT has promised to sell its cable TV operations, which consist of franchises in Westminster and Milton Keynes. It has also pledged to offer third party companies access to the network it is planning to set up. Karel van Miert, the Commission's competition chief, said he was now likely to give the venture the green light.

BiB, which is a collaboration between BT, BSkyB, Matsushita and Midland Bank, was set up last year to exploit the opportunities for interactive services offered by the introduction of digital TV.

From the beginning of next month the group is planning to sell decoders, known as set-top boxes, which plug into any TV set. The boxes, which will be subsidised by BiB to make them more affordable, will offer access to a range of interactive products as well as BSkyB's 200-channel digital satellite TV service.

For the past year, BiB has been locked in negotiations with the European Commission. Even though the venture has the support of all the UK's regulatory bodies, the EC was concerned that BT's involvement would freeze out potential competitors.

Industry observers said BT had escaped from the review lightly. Its cable operations are a tiny part of its business, while the requirement to share the service with any third parties was widely expected.