Oftel chief hints at BT controls

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British Telecom was faced last night with the likelihood of new regulatory hurdles before it can complete its pounds 13bn takeover of MCI, the US long- distance carrier.

Don Cruickshank, the telecommunications regulator, gave his clearest signal yet that he will seek new controls over BT's UK operations to safeguard investment and service standards for British consumers.

Speaking before the Commons Public Accounts select committee, Mr Cruickshank gave a glowing view of BT's transformation from a state-owned monopoly to a global contender capable of mounting the UK's biggest takeover. However, he warned that he was concerned that after the deal went through, BT would still provide enough cash to give UK customers a fair deal.

"There are certain issues I intend to be satisfied on before I give my blessing," he said of the ongoing investigations by his office, Oftel, into the deal. "My test of that is that the company... will be able to continue to invest so that the UK consumer has a world-class service."

Mr Cruickshank said another concern he had raised was his ability to continue to get information about BT's activities once it had converted itself into an Anglo-US company with offices on both sides of the Atlantic. "I will be discussing this with BT and possibly proposing licence amendments to secure that," he said.

Mr Cruickshank said his main concern was for the estimated 16.5 million households with average or below-average phone bills who were dependent on BT for their phone service.

His comments add to the growing regulatory pressure on BT, which has already admitted it is likely to take a year to get the tie-up with MCI approved.

The biggest hurdle the company faces is convincing the US watchdog, the Federal Communications Commission (FCC), that the British phone market is now sufficiently liberalised. The FCC has already had a complaint from AT&T, the largest phone company in the US, about BT's dominance of the local residential market.

Mr Cruickshank did not suggest he was opposed in principle to BT making international acquisitions. He told MPs: "It's a great credit to BT and the UK's regulatory regime that we have a company which is managerially and financially able to enter into such a transaction."

However, he said: "The number of regulatory authorities who have to look at this transaction is very large indeed."