US phone giant takes on BT

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Industrial Correspondent

AT&T of the US, one of the world's largest telecommunications companies, is taking on BT in its home market with telephone and multimedia services for businesses and consumers. The American giant said that its new UK telephone company, with a workforce of 400, would have a $1bn turnover within five years.

The launch coincided with new data from Oftel, the industry regulator, showing sharp improvements in BT's standards of service since privatisation. But the watchdog's report also highlighted poor performance on several counts by Mercury Communications, the company set up 12 years ago to be the main rival to BT.

Robert Allen, AT&T's chairman, said that customers in the UK wanted choice and affordable advanced services and pledged that the US group would invest for the long term.

AT&T will start with services for large multinational companies with plans for consumers to be unveiled later this year, possibly involving links with cable television companies.

AT&T will use lines leased from BT, Mercury and other network operators and, if necessary, it will also build its own lines.

Some large customers will have dedicated lines into AT&T's own switching system but the rules governing the industry dictate that others will have to dial a three-digit code to use the company's services.

Mr Allen added: "Our intention is to get this right rather than make a lot of noise. We will speak with actions rather than words." AT&T made it clear that it would aim to attract the higher spending customers. It also said that while its prices would be competitive they would not necessarily be the lowest available.

Mr Allen called for tougher regulation to prevent anti-competitive behaviour in the UK market and to ensure "an equal playing field". "There is clearly no mechanism for the regulator to detect, punish and prevent anti-competitive behaviour," he said.

His comments come as BT prepares for battle with Don Cruickshank, the director general of Oftel, over his proposals to take on sweeping new competition powers. BT must respond by next week.