MCI deal in mobile phones collapses

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The Independent Online
NEW YORK - A deal worth dollars 1.8bn that would have seen MCI, BT's transatlantic partner, enter the mobile telephone business collapsed yesterday without explanation, although shifting share prices appeared to have been a factor, writes Larry Black.

MCI agreed in February to invest dollars 1.3bn in NexTel, joining the cable television operator Comcast in transforming the mobile radio network into a national wireless telephone system.

MCI was to have spent dollars 800m this year buying 22 million shares in NexTel, giving it a stake equal to the 17 per cent Comcast already owns. The two partners also agreed to spend an additional dollars 500m each over the next three years to give them joint control of the company, which is America's largest radio- dispatch network.

But share prices of all three communications companies have been buffeted by regulatory changes in cable television and by the entry of new competitors in the personal communications market.

The NexTel link-up would have allowed MCI, a long-distance communications network with no direct access to local telephone subscribers, to bypass local telephone exchanges, which at present account for almost half its costs. The wireless service was to have been operational in 10 cities by the end of the year and would have competed with cellular service.

Earlier this year BT completed the purchase of a 20 per cent share in MCI, America's second- ranking long-distance carrier, for dollars 4.3bn.

Yesterday NexTel, MCI and Comcast said they had terminated their original agreement but would explore the possibility of a strategic alliance 'on different terms'.