Outlook: That's the problem with the City - no vision
Thursday 02 October 1997
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.
educationTo mark International Women's Day, Sarah Brown on how charities have brought proper joined-up thinking to the delivery of education
South African rhino finally put down after roaming Kruger park for days with horn hacked off and bullet in brain
Lammily: Barbie-like doll hits Kickstarter fundraising target in a day
Belle Knox: How the porn star student from Duke University became bigger than Justin Bieber
Oscar Pistorius trial: Neighbour feared athlete would use gun that killed his girlfriend Reeva Steenkamp to shoot himself
Top 10 most expensive cities in the world: Singapore named costliest place to live – but what about London?
Apple's Tim Cook: Business isn’t just about making profit
Thousands of young people forced to go without food after benefits wrongly stopped under 'draconian' new sanctions regime
Ukraine crisis: New navy chief 'defects' and surrenders Crimean HQ as Putin claims ultranationalists forced intervention
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
- 1 The future of sex: The first female condoms were derided, mistrusted and shunned - but will their modern counterparts catch on?
- 2 South African rhino finally put down after roaming Kruger park for days with horn hacked off and bullet in brain
- 3 Sir Patrick Stewart patches into David Cameron and Barack Obama's Ukraine talks with packet of wet wipes
- 4 Study suggests that 'gaydars' are real - at least for women
- 5 Man stabbed with Legend of Zelda Master Sword in serious condition
iJobs Money & Business
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...
£30000 - £40000 per annum + benefits: Pro-Recruitment Group: Personal Tax, FTS...