Sir Iain Vallance, the BT chairman, told the meeting that its relationship with MCI remained "strategically important" but he conspicuously failed to endorse it on the present terms, saying that BT had not yet reached the point of no return. The profit warning wiped pounds 2.35bn off BT's market capitalisation and could rob Concert, the name of the merged group, of earnings growth for the next three years.
Both BT and MCI executives ruled out immediate resignations of senior executives following MCI's warning that its attempts to enter the US domestic market would mean losses of $800m this year and $1bn next year. Asked whether heads would roll, Bert Roberts, chairman of MCI, said: "Not only is there no case for that but nobody in BT or MCI has ever suggested it."
Mr Roberts added that the merger was as "strategically valid" today as ever but significantly he would not say whether he expected the terms to remain unchanged. Earlier this week MCI said it expected the merger to proceed as currently structured.
The meeting in Edinburgh was attended by 930 shareholders, including a number of US arbitrageurs who had flown in especially. The arbs are facing huge losses - estimated at up to pounds 1bn - if the merger collapses after betting on the spread between the price of BT and MCI shares.
A succession of angry shareholders attacked the merger as a US "ambush" and a "sting", claiming that BT had become yet another British company to be "suckered" by the Americans. Commenting on the profits warning, which cuts the value of MCI by more than $3bn according to some analysts, one shareholder asked: "Is this an attempt to sting BT or is it management inefficiency on both sides?"
Another shareholder said Sir Iain would be known as the English muffin in Washington because the Americans were going to eat him for breakfast. Sir Iain, who hails from Edinburgh, said he regarded himself more as a "Scottish thistle". Asked repeatedly whether BT would now renegotiate the deal or pull out, Sir Iain stonewalled. Earlier he told shareholders that revising the terms of the deal would be a "second order" question addressed only after the BT/MCI review team had thoroughly examined MCI's plans for the US market. The review will be led for BT by Sir Peter Bonfield and Robert Brace, finance director, and by MCI's chief executive, Gerald Taylor, and its finance director, Douglas Maine, one of the two MCI executives whose jobs were said to be on the line.
One shareholder, Jon Meyer of Midlothian, asked whether Sir Peter should resign for allowing "a British giant to be suckered by the Americans". He contrasted the way Sir Peter had been introduced to last year's annual meeting as the complete businessman with his failure to spot the looming crisis at MCI, even though he was a director of the company. But Sir Iain leapt to his chief executive's defence, saying there was no question of resignation.
The meeting also heard an attack by the investor watchdog group, Pirc, on the bonus schemes Sir Peter and other Concert directors will be eligible for should the merger proceed. Stuart Bell, a director of Pirc, urged shareholders to vote against the schemes, which could net Sir Peter a pounds 2m-pounds 3m bonus, saying they were excessive, unnecessary and too heavily weighted in favour of US remuneration practices.
Mr Bell received the backing of a significant minority at the meeting and succeeded in obtaining a poll of all shareholders. There was also a minor revolt against the election of MCI's Mr Roberts and Mr Taylor as directors, although both appointments were approved overwhelmingly on a poll.Reuse content