Cable & Wireless seeks link with US telephones giant

Cable & Wireless has renewed its interest in forging an alliance with a US telephones giant, just as British Telecom's hopes of merging with MCI have fallen flat.

Chris Godsmark, Business Correspondent, reports on C&W's new moves to join Global One, the partnership between France Telecom, Deutsche Telekom and Sprint, the third-largest phones group in the United States.

Dick Brown, C&W's deal-hungry chief executive, is understood to have put joining Global One back at the top of the company's agenda in recent weeks. There had been intense speculation late last year that C&W would become part of the alliance, which offers international telecommunications services to large business customers, following British Telecom's landmark merger proposal with MCI.

Sources close to C&W said the group had decided to open a special office in Washington to lobby the US telephones regulator, the Federal Communications Commission (FCC). The regulatory team would work separately from C&W's existing US subsidiary, Cable & Wireless Inc, based outside the city.

The regulatory office, being created by Elizabeth Wall, C&W's head of regulation and legal affairs, would be used to encourage the FCC to push for more advantageous price regimes from US phone networks. But the move is likely to lead to speculation that C&W will try to tie up a deal with Sprint, France Telecom and Deutsche before the end of the year.

One suggestion was that C&W would seek the regulator's approval to take a stake in Sprint, the US's third-largest phone group, to mirror the 10 per cent shareholdings in the company already taken by France Telecom and Deutsche Telekom as part of Global One. Previous rumours about a link earlier this year had suggested Sprint might even buy part of C&W.

Mr Brown, a former senior Sprint executive, has kept up a close relationship with the company. Observers close to C&W have suggested the two companies would have linked up long ago, but for the presence of France Telecom and Deutsche in Global One.

France Telecom, which is in the process of being floated by the French government, has also become more upbeat about C&W's prospects of joining Global One. At an investors' roadshow in London late last month, Michel Bon, France Telecom's president, confirmed that "technical discussions" with the UK group were continuing.

He added: "There is an interest for us and an interest for them to consider a global alliance. So there has been talk all along on a technical level." The discussions involve the way the four companies' existing international interests would fit together and attempting to isolate potential conflicts of interest.

A move into Global One by C&W might raise eyebrows among industry analysts, when British Telecom's merger with MCI has been effectively killed by the higher $30bn bid from WorldCom. C&W shares soared after the news on suggestions that the company would renew the merger talks with BT which were broken off amid mutual recriminations last year.

A deal with Sprint would also be the culmination of Mr Brown's frenetic 15-month tenure at C&W, which has seen a string of deals that have boosted the company's reputation and share price. They include the merger of Mercury and three cable companies to form Cable & Wireless Communications, a pounds 500m deal to buy into one of Australia's largest phone companies and the agreement with China over the future of HongKong Telecom, C&W's main cash earner.