City & Business : Is it worth putting this call through?

The friendliest of mergers can fall to pieces if small misunderstandings are allowed to fester into big disagreements. This is doubly true for cross-border deals, where there are differ- ences of language, culture and media.

British Telecom and MCI have faced this situation in the past few weeks. With hard work and skillful manoeuvring they have hammered out a compromise. They are to be congratulated. Amazingly, the only people to be hurt in the revised deal seem to be the risk-loving arbitrageurs who bought MCI shares and sold BT shares short in the hope of exploiting differences between the share prices and the value of the deal itself. Life can be tough sometimes, can't it?

Now the real work begins. BT executives have poured scorn on those commentators and institutional shareholders who dared question the logic of the mega- deal on the grounds that MCI was going to spend a lot of British shareholders' cash on a wild goose chase into the American local telephone market. While the discount may mollify the critics, BT would be foolish to ignore the substance of the criticism.

The local phone market, worth around $100bn (pounds 62.5bn) last year, is a tantalising prize, but as Tantalus found out to his cost in Hades, that prize can remain maddeningly out of reach. Any liberalisation of the market will be painfully slow, and may not benefit MCI. If the the US local phone companies, the "Baby Bells", drag their feet on providing the technical links to their local networks or, worse still, convince state regulators to allow them to charge the long-distance operators more for leasing space on those networks, any profits for MCI will be long in arriving. At the same time, they may be able to claim access to the long distance market themselves under the quid pro quo outlined in the 1996 Telecommunications Act. For certain operators, such as Bell Atlantic and Nynex, which between them have the East Coast market from Washington DC up to Maine, this will almost be a licence to print money. Already 40 per cent of US long-distance calls go between their networks, but for the moment at least they don't see any of the revenue. With minimum investment, these Bells can pick up a piece of this $32bn market and hurt MCI (and others) in the process.

In MCI's favour is the fact that it is probably a more nimble and experienced operator in competitive markets than any of the Bells, which have had their own monopolies since being split off from AT&T in 1983. With BT's coffers and local phone experience to call on, it will certainly be able to mount an effective challenge. But it would be a mistake for the leaders of BT and MCI to ignore the problems facing their proposed enterprise when they hit the road to sell the revised deal to investors, some of whom are nursing losses and whose patience in the face of renewed hyperbole might fray.

Frock horror

TWO household names in British retailing, two different problems. Or so it would seem. Laura Ashley's well documented difficulties stem from its miscalculation of stock levels earlier this year, and the failure of its "big is better" strategy in the US to pay dividends, for which chief executive Ann Iverson has taken some deserved heat. It is also labouring under the cumbersome image of the frumpy frock shop, which may be an undeserved stereotype but still manages to steer potential customers into Oasis or Next for their dresses and accessories. If they ever made it to Laura Ashley, they might be in for a pleasant surprise. Ms Iverson's mistake has been to change the image without telling the customers about it.

By way of contrast, WH Smith has no problem attracting customers into its many outlets, but cannot seem to get them to spend money. Nearly 40 per cent of the store's visitors leave without buying anything. Thanks to the attentions of outgoing chief executive Bill Cockburn, Smith has got good stock control systems and is rarely oversupplied with HB pencils or greetings cards. But Mr Cockburn's successor, whoever that might be, will be landed with the task of working out why customers do not buy enough of those pencils and cards.

Looked at another way, the retailers' problems are not so different. Neither management has got to grips with the fundamental of retail existence, which is to give your customer good reason to buy from your store rather than anyone else's. Often this is dressed up in "customer focus" manager- speak, without much being done. There are notable exceptions: Next, Tesco and Asda have all aligned their brand images to their offerings, and convinced customers that both are worth having. Laura Ashley and WH Smith have a way to go yet.

Contract or con trick?

A FRIEND passes through town on his way from Peking to Stanford Business School, and offers two pieces of advice for people doing business with China. A contract, he says, may mean a statement of rights and obligations to a westerner, but in China it is merely a sketchy letter of intent, liable to change at any time without notice. A case in point is the General Motors engine plant in Peking, a state-of-the-art factory built with $150m of the US company's money. When the joint venture was signed nine years ago with a Chinese state enterprise, they told GM confidently that this would be "China's engine", and the anticipated production of 300,000 four- cylinder engines a year to power cars, vans and small trucks would be quickly swallowed up by burgeoning demand. The factory was ready to roll in 1991. Six years later the factory has produced precisely 120 engines. Market conditions have changed, say the Chinese, their way of explaining that these engines would were not designed to fit in most vehicles made in China. The western view is more blunt: "The world's largest carmaker believed that the original contract would be honoured, but the Chinese had a different idea," says our friend.

The other piece of advice? Do not hesitate when crossing a busy road. Chinese drivers do not respect traffic lights or pedestrian crossings, but are very skillful at avoiding street-crossers if said pedestrians keep moving at a steady pace. Stop and you are dead. It's a cheery place, Peking.

Suggested Topics
Arts and Entertainment
Banksy's 'The Girl with the Pierced Eardrum' in Bristol
art'Girl with the Pierced Eardrum' followed hoax reports artist had been arrested and unveiled
News
peopleJust weeks after he created dress for Alamuddin-Clooney wedding
Life and Style
tech

Sales of the tablet are set to fall again, say analysts

Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

PROMOTED VIDEO
Arts and Entertainment
George Lucas poses with a group of Star Wars-inspired Disney characters at Disney's Hollywood Studios in 2010
films

George Lucas criticises the major Hollywood film studios

Sport
football West Brom vs Man Utd match report: Blind grabs point, but away form a problem for Van Gaal
Arts and Entertainment
Bloom Time: Mira Sorvino
tvMira Sorvino on leaving movie roles for 'The Intruders'
Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Adel Taraabt in action for QPR against West Ham earlier this month
footballQPR boss says midfielder is 'not fit to play football'
News
First woman: Valentina Tereshkova
peopleNASA guinea pig Kate Greene thinks it might fly
Voices
Chris Grayling, Justice Secretary: 'There are pressures which we are facing but there is not a crisis'
voices

Does Chris Grayling realise what a vague concept he is dealing with?

Life and Style
The charity Sands reports that 11 babies are stillborn everyday in the UK
lifeEleven babies are stillborn every day in the UK, yet no one speaks about this silent tragedy
News
Blackpool is expected to become one of the first places to introduce the Government’s controversial new Public Space Protection Orders (PSPOs)
news

Parties threaten resort's image as a family destination

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Customer Service Executive / Inbound Customer Service Agent

£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

ASP.NET Web Developer / .NET Developer

£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Project Coordinator - 12 month contract

£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...

Day In a Page

Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Salisbury ranked seventh in world’s best tourist cities

The city is home to one of the four surviving copies of the Magna Carta, along with the world’s oldest mechanical clock
Let's talk about loss

We need to talk about loss

Secrecy and silence surround stillbirth
Will there be an all-female mission to Mars?

Will there be an all-female mission to Mars?

Women may be better suited to space travel than men are
Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album