GTE puts a spanner in the wheel of WorldCom's MCI bid

The $37bn takeover bid for MCI, the US long distance phones giant, by WorldCom is facing new hurdles, it emerged yesterday, following a complaint to regulators by GTE, the phones group which lost out in a three-way offer battle.

The objection to the deal, made this week, came as GTE revealed plans to expand its operations in Europe and raised the prospects of an alliance with British Telecom, which also saw its plans to merge with MCI collapse last year after the higher bid approach by WorldCom.

GTE made clear that it hoped to expand its relationship with BT, regardless of the outcome of the WorldCom bid for MCI. Had GTE won the bid, it would have cemented a close partnership with BT, though GTE said three-way merger talks were not seriously contemplated.

Mike Masin, GTE's vice chairman responsible for international strategy, said: "We'd like to continue to build the relationship with BT."

GTE, the third largest telecoms business in the US, said it had raised objections to the WorldCom link-up with MCI with the Federal Communications Commission, the regulator.

Mr Masin said the group had "expressed certain reservations," including the possibility that WorldCom could use its dominance to raise wholesale line charges to other operators.

GTE last summer entered the bidding frenzy for MCI with a $28bn all-cash offer. The bid remains on the table, though WorldCom raised its offer from $30bn to $37bn last November, enough to persuade the MCI board to recommend the deal to shareholders.

Mr Masin said there was still a possibility that WorldCom's bid would fall foul of US regulators, or that its share-price would drop, reducing the price paid to MCI's investors.