Why BT thought of backing Murdoch and decided not to

BT considered taking a stake in Rupert Murdoch's News Corporation or in the group's planned joint venture with MCI but rejected the idea as "unwise". Sir Iain Vallance, chairman and chief executive, said that "sensitivities" in the UK about combining information providers with telecommunications operators had persuaded the company not to participate directly in the alliance.

Sir Iain said that such direct links between News Corp and BT would have been "a red rag to the slightly parochial regulatory bull".

Asked if BT might reconsider, he added: "We have no intention of doing so. We have certainly ruled it out at this stage."

He said that BT had not consulted the Government or the watchdog, Oftel, on the issue but added: "From a policy point of view, we have decided so far not to take a direct stake in content."

He also said that BT was becoming a "retailer" of all things that can be converted into digital form and that retailers should not be locked into any one supplier of goods and services. "We have strong vested interests in having access to a wide range of content. The range and richness of our forthcoming interactive TV trials in Ipswich demonstrate that," he said.

Sir Iain gave his full support to the alliance between News Corp and MCI, saying that BT could work with them "in areas where it makes sense". Although he declined to be specific, he said this could involve delivering services for the partners over BT networks in other parts of the world.

He said the alliance underlined the trend towards globalisation in the industry and the convergence between entertainment, information and telecommunications. He suggested, however, that he expected no early relaxation by the Government of the ban on the company delivering broadcast entertainment over its wires, which is not due to expire until 2001 at the earliest.

"We have set that one behind us. As with any lobbying or debate with the Government, it becomes counter-productive to keep banging on the door once they have made up their minds. We just wanted a date and we did not get it, but we will get it in time." He added: "Meantime, we will concentrate on the things we are allowed to do."

BT's forthcoming trials in Ipswich will include delivery of video-on- demand and other services over the telephone wire. These type of on-demand services are not "broadcast" and therefore get around the Government ban.

News Corp is involved in the trials, as are others including the BBC, WH Smith and Pearson. BT also has other links with News Corp.

The main co-operation involves BT shops selling dishes and subscriptions on behalf of BSkyB which in turn markets BT's products and services through its magazines.

Earlier this year, BT sponsored BSkyB's Telethon fund-raising event.

A spokesman for BT said that apart from these links "New Corporation is a normal customer for BT".