Outlook: That's the problem with the City - no vision

Phew! What a relief. By luck rather than design, BT is finally off the MCI hook and the beleaguered US telecoms group will now largely be somebody else's problem. That, at least, will be the reaction of many to WorldCom's out of the blue rival bid for MCI. It is almost inconceivable that BT, having been forced by its own shareholders to negotiate down the price it is bidding for MCI, could now come back with a better offer. To top WorldCom it would have to pay more than first time round.

Unless something unexpected happens, then, BT looks to be definitely out of the running. If you are James Dodd, telecoms analyst at Dresdner Kleinwort Benson, or another part of that vociferous City minority which has opposed this deal all along, that is plainly a good thing. BT is now free to embark on an alternative strategy of handing barrowloads of cash back to its shareholders and engaging in the process of small add-on acquisitions in the US and elsewhere. That's going to do a lot more for shareholder value, Mr Dodd argues, than buying a mature, commodity telecoms company in a highly competitive market.

He may be right, but the fact that WorldCom, one of the best performing stocks on Wall Street over the last 10 years, is prepared to pay such a premium for MCI, and along the way hint that it might also be interested in acquiring BT as well, rather suggests that Sir Iain Vallance and his chief executive at BT, Sir Peter Bonfield, have had the strategy right all along.

Admittedly, there are overlaps and local synergies between WorldCom and MCI that make MCI worth more to WorldCom than to BT. Even so, it is plain from what Bernie "joke-a-minute" Ebbers, WorldCom's founder and president, was saying yesterday that he shares some of the same vision and sense of where the telecoms industry is going as Sir Iain. Both believe the industry will progressively become divided into big global players and small niche domestic operators. By acquiring MCI and making clear his intention to continue with MCI's existing links with BT, Mr Ebbers is putting himself firmly in the first category.

WorldCom is one of those extraordinary business success stories that could only happen in America. Through a combination of inspired entrepreneurialism and aggressive acquisitions, it has grown from nothing 14 years ago, to one of the largest telecoms companies in the US. If it pulls off the MCI deal, it will start to justify its name by becoming the third largest telecoms company in the world by market value, not far behind AT&T and NTT.

Part of the explanation for this is that its stock is by any standards ridiculously highly valued. Wall Street has given Mr Ebbers' ambitions a following wind that Sir Iain can only dream of - the leverage to make big acquisitions at heady prices and give his empire the critical mass it needs to establish itself on the world stage.

BT, a privatised state monopoly, could never have hoped for such support but it might reasonably have expected a less cynical hearing than it got for its MCI transaction. The way in which shareholders forced BT's hand and a sharp downward revision in the terms last summer looked like a victory for common sense at the time. The tragedy is that by doing so, the City may have condemned BT to a permanent position in the second division of world telecom companies. There is unlikely to be another opportunity quite like MCI.

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine