Having been forced for a second time to abandon its US ambitions, BT now looks to be a chronically overcapitalised company. BT executives are keen to stress that the pursuit of an aggressive international strategy - which presumably means acquisitions - remains a priority, but even so, there is going to be a lot left over for shareholders who can happily contemplate very considerable capital repayments.
Better still from a City perspective, the affair may perversely have turned BT from hunter into hunted. This is the second big setback for BT in the US in five years. Its first attempt to expand there through the acquisition of the mobile phones company, McCaw, was thwarted by a combination of regulators and AT&T. This second failure looks uncannily like a question of the US conspiring one way or another, consciously or unconsciously, to keep the foreigner out as a major league player in its domestic telephones market. If telecommunications is becoming a bid or be bid for business, BT may just have found itself relegated to the latter category.
BT has made itself naked in more senses than one. During the course of the regulatory exchanges over MCI, the British government was persuaded to abandon its special share in BT. If BT remains as overcapitalised as it presently is, it becomes a potentially attractive target and with the special, protective share now gone, there's nothing to stop the likes of AT&T bidding.
While this would still seem a rather unlikely end game, it is none the less possible to see a bid premium developing in the BT share price. More good news for shareholders, then. From a short-term shareholder value perspective, it is usually better to be the object of someone else's strategy than to have one yourself. What of the longer-term outlook though? BT still has plenty to go for in Europe and the Far East but, deprived of a significant position in the world's largest telecoms market, it may find itself permanently assigned to the second division of telcos. That's the big danger and that is also why BT must strive for a worthwhile working relationship with MCI's new master, WorldCom.
There was always something a little bit intangible about the rationale for the MCI takeover. It was partly about the importance of size in the rapidly changing global market place for telecommunications, partly about the marrying of MCI's entrepreneurial culture with that of BT's more defensive, public telco culture and the opportunity value that might create in deregulating European markets. And it was partly about tapping into the fast growing international market for smart, business orientated telecommunications. Unfortunately, it could always be argued that the two rival suitors for MCI, WorldCom and GTE, were more compatible and logical partners. It's a shame none the less. For a time there, it looked as if Britain was in with a real chance of joining the world leaders. That may now have gone for good.