Cable & Wireless edges closer to US partnership

The complex pattern of multi-billion pound global telecommunications shifted yesterday as Cable & Wireless apparently edged closer to a long- awaited partnership with Sprint of the US and intense speculation surrounded a possible link-up between British Telecom and Spain's main phone company, Telefonica.

Cable & Wireless refused to comment on reports that it was examining mounting an outlandish takeover bid for Sprint, the US's third-largest long-distance phone operator. The move, which could value Sprint at more than $15bn, was seen by analysts as a logical way for C&W to ally itself with Global One, the alliance between the US company and its partners, France Telecom and Deutsche Telekom. It would come on the heels of BT's planned pounds 13bn merger with MCI, Sprint's larger US rival.

One suggestion was that the two European carriers would use C&W as a vehicle to bid for the 80 per cent of Sprint they do not already own. The US regulator, the Federal Communications Commission (FCC), would almost certainly block a direct bid on the grounds that French and German telecoms markets are too restricted. The FCC would look far more favourably on a UK bid because the British phone market is open to competition.

Last night William Esprey, Sprint's chairman, insisted a takeover by C&W would be "impossible" because of contractual agreements with France Telecom and Deutsche Telekom. However, a France Telecom spokesman confirmed C&W was discussing joining Global One. "There are talks with Cable & Wireless and they centre on seeing whether the company can become the British partner for Global One."

Analysts said any imminent bid moves by C&W would be difficult because the group is currently fully occupied in completing the landmark pounds 5bn merger of its main UK subsidiary, Mercury, with two cable companies, Bell Cablemedia and Nynex CableComms. C&W yesterday announced three further senior job appointments for the venture, called C&W Communications (CWC). It is now likely to publish a formal offer document for shareholders by the end of the month.

Graham Wallace, CWC's new chief executive, is also considering appointing a chief operating officer to tackle the complex task of merging the three groups' operations. One candidate is thought to be Ian Boatman, a career C&W executive who recently returned from Germany after the company pulled out of its alliance with utility giant Veba.

Separately BT declined to comment on reports that it was to take a stake in the international division of Telefonica, which has lucrative interests in the fast-expanding South American phone market.

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