Plans to end BT and Mercury duopoly

Telecoms: Government plans to open up international market as C&W takeover speculation mounts
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Industrial Correspondent

The Government is set to end the BT and Mercury duopoly over international telephone services from the UK, which removes the last main restriction in the telecommunications industry. Ian Taylor, minister for science and technology, said yesterday that the proposal, if it went ahead, would save consumers up to pounds 140m a year in lower bills and could result in total losses for BT and Mercury "on a similar scale".

US companies including BT's arch-rival, AT&T, have been lobbying the Government for years for the ability to offer international services in their own right. At present companies needing links from the UK must rely on capacity leased from BT and Mercury or simply pay them to carry the calls.

Mr Taylor said: "Opening up the market in international telecoms services will boost competition and lower prices. It would make the UK a key location for inward investors who increasingly need cheap, high quality telecoms services, basing their European operations in the UK."

He said that depending on the comments he receives by 15 April the Government could soon be inviting new operators to apply for licences. It is understood that the initial objective is to free up links to other Europeans but with wider liberalisation to follow later.

City analysts said that the move could hurt Mercury - part of the Cable & Wireless group - much more than BT. Mercury declines to say how much of its revenue comes from international calls. However, according to the regulator, Oftel, the company's share of the international market is 25 per cent compared to 8 per cent within the UK.

A spokesman for Mercury said: "We are all for it. But only as long as the measure is matched by other European countries and only as long as liberalisation elsewhere is seen to be as effective as it is here."

Shares in Cable & Wireless fell by 4p to 450p while BT's share closed at 367.5p, a fall of 9p on the day.

BT's turnover from international calls in the year to 31 March 1995 was pounds 1.9bn, from a total of pounds 13.3bn. The company said that international call charges have already fallen by 46 per cent in real terms since it was privatised in 1984.

A spokesman for BT said: "It is a very competitive market already with Mercury extremely active and with other companies re-selling leased capacity. Prices are already extremely keen. It will be very interesting to see what margins other companies can see there."

The European Commission wants full liberalisation throughout EU telecommunications markets from 1 January 1998. However, the Government is hoping that by leapfrogging ahead, the UK will become more attractive to international businesses.

AT&T "congratulated" the Government for moving ahead to international liberalisation.