For while much of the media coverage here characterises the relationship between BT and MCI as one of strained division, the reality is that the two sides are working in harmony to resolve the problems relating to the losses incurred by MCI in the US local telephone market.
The two sides are united by a common and continued recognition of the logic of combining the two businesses. More important, there is a common recognition of the pressure each company is under from its respective shareholders.
MCI knows full well that BT's institutional shareholders are insisting that the terms of the planned takeover should be renegotiated in light of the poorer-than-anticipated financial performance from the US business. BT, for its part, recognises that MCI investors believe their company's ability to extract significant value from the US local telephone market in the long term means the merger should proceed unamended.
Although it makes for more dramatic copy to suggest that BT has been lured into a legal minefield from which it cannot escape, the fact is that there is no incentive for either side to conduct their negotiations in a courtroom.
One key objective of the current review is to devise an endgame that will persuade both sets of investors that their point of view has prevailed. The other key objective is to decide not whether BT should proceed with the merger but whether MCI should continue to invest so heavily in the local telephone market.
A common interpretation of MCI's shock announcement last month was that it was simply costing much more and taking much longer than expected to crack the local telephone market in the US. The subtext to that announcement was that MCI might simply pull out of the local market altogether. It is not a company that is prepared to keep ploughing money into something if it cannot see an adequate return on that investment. The joint review with BT is trying to answer the question of when it will become economically unviable to continue with MCI's strategy of employing a facilities-based approach to the US local market.
The subtext may have been lost on the media over here, but not on the regulators and politicians in Washington. The message from MCI is clear. If you want proper facilities-led competition in local telephone markets then MCI is your best shot. If the politicians want competition, they will have to provide more support than has so far been offered.
It was more than coincidence that shortly after the MCI profits warning, the Federal Communications Commission announced it was setting up a task force to examine allegations that local telephone companies are blocking efforts to open markets to competition as envisaged by the 1996 Telecommunications Act. And other regulatory decisions around the country suggest the tide is turning in MCI's favour, albeit very slowly.
Could it be then that MCI's profits warning was a high-risk tactic designed to garner more support from regulators and politicians? The stakes are extraordinarily high and entirely justify such an approach. MCI, which in its infancy used to be known as the law firm with an antenna on the roof because of its use of the courts to prise open the long- distance market, is no stranger to the rough and tumble of taking on monopoly suppliers. It is used to getting its own way. Having taken on Ma Bell and won, it will not give in to the Baby Bells without a fight.
MCI remains the best partner to fulfill BT's US ambitions. Complete withdrawal is a last and desperate resort, which would signal a total breakdown of a relationship between the two companies that to date remains extremely strong. There is a clear will on both sides to make this deal work. When the review is completed later this month, the way to make this happen will be more apparent.
Booster from Zeneca
NINE months ago when the Zeneca share price was a little over pounds 17, I argued that the shares were undervalued on fundamentals and should be trading at pounds 20. The market now agrees. The perpetual takeover rumours have proved unfounded and the price is at last beginning to reflect most of the company's underlying strengths.
This week's interim results will confirm those strengths and will be impressive on a constant currency basis - currency translation will provide something of a drag on reported earnings growth.
Since the demerger from ICI in 1993, Zeneca has delivered all the drugs in its pipeline at that time to market. The last is Seroquel, a treatment for schizophrenia, which was deemed approvable by the Federal Drugs Administration on Friday. Full approval will come in the next few weeks. It will give Zeneca a foothold in an market that is expected to be worth $4bn (pounds 2.5bn) worldwide in the next three years.
Unfortunately, some commentators are questioning the strength of the drugs pipeline going forward. Having spent a day last week in Wilmington, Delaware, with some of the company's scientists, I have no doubts about the commitment and infrastructure to deliver in the future.
Worries about patents expiring are also overdone. The final patent for Zestril, for instance, does not expire until 2009, and such generic erosion will be more than compensated for by new products.
Zeneca has underperformed both its British peers and the US drugs companies. If the shares were worth pounds 20 nine months ago, they must be worth closer to pounds 25 today.