Business Comment: A lifetime of marital strife ahead for BT

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The Independent Online
Things are beginning to look bleak for the marriage between British Telecom and its American bride MCI. If the comments yesterday of Doug Maine, MCI's finance director, are to be taken at face value, then this is a relationship which appears doomed to come to an unpleasant end in a dark country lane.

Mr Maine has no reason to warm to BT. After all, it was his scalp that BT wanted for the profits warning that has cast such a long shadow over the merger.

But if he is right and MCI has no intention of reining in its investment plans for entering the local US market - the cause of the profit warning - then Sir Peter Bonfield has been wasting his time for the last three weeks. Unless the cost of that entry can be scaled down or BT succeeds in negotiating a lower price for the merger, then it is hard to see how its institutional investors can continue to back the deal.

It is, of course, entirely possible that MCI is playing hard ball in the hope that its head-down and charge tactics will bring the same results in the US domestic market as they have in its core long-distance business.

But it is one thing to be uncompromising with the opposition and quite another to stand eyeball to eyeball with one's bethrothed. The clash in culture and management styles that BT-MCI represents was evident from the day the merger agreement was signed and has become more so as the present debacle has unfolded.

BT cannot go ahead with the deal as it stands. But nor can it consummate a relationship with a partner that is prepared to be as prickly as MCI.

BT's institutional investors have so far been fed only a meagre diet of information as to whether the merger can be saved at an acceptable price. Sir Peter will have to come up with something more substantial and more compelling when he reports second-quarter results today. The $150m poison pill that BT will have to swallow if it abandons MCI at the alter is looking more attractive by the day if the alternative is to be a lifetime of marital strife.