AT&T readies for battle with BT: Granting of licence to US giant sets scene for new wave of competition in British telephone services

AT&T, the world's second-biggest telecoms group, prepared to compete with BT and Mercury yesterday as it celebrated winning a licence to offer public telephone service to homes and businesses throughout Britain.

A spokesman for the US giant said: 'We are thrilled. Let the games begin.'

The company has been waiting for more than a year for the licence, which has now been agreed in principle by Michael Heseltine, President of the Board of Trade. AT&T is expected to become a formidable rival to BT and Mercury in the market for lucrative business communications services.

The licence will also allow AT&T to offer international telephone services between the UK and some other countries using capacity leased from BT or Mercury. The company wants a full international licence but none has so far been granted other than to Mercury and BT.

AT&T will start its services as soon as possible, beginning with multinational companies and gradually expanding to smaller businesses and households. It is expected to use a variety of means to get to the domestic user, including links with cable television companies, BT and new telephone network operators such as Cambridge-based Ionica.

AT&T said that it had not yet seen the licence, which may include obligations concerning standards and services.

The company is not likely to build its own long-distance network but will probably lease capacity from existing networks, including those of BT, Mercury and Energis, part of the National Grid Company.

AT&T was for months in abortive talks concerning a joint venture with Energis but now says there is no barrier to forming business alliances with the company, whose long-distance network is due to open in the autumn.

Merrill Tutton, president of AT&T in the UK, said the company would do whatever deals were necessary to enable it to provide high-quality services at the right price. He said AT&T might build networks where necessary but he believed that Britain already had enough fibre optic capacity.

Mr Tutton warned that there were still significant barriers to be overcome. These included the granting of a full international licence and changes in the terms for interconnecting to BT's network.

' The terms and conditions for interconnecting to BT are murky and very unfair.' He said he was far from satisfied with the cost and method of handling interconnection agreements between BT and other operators and was concerned that the process was not open to scrutiny.

The issue of interconnection is one that concerns other rivals that need to use BT's wires. Oftel, the regulator, is trying to resolve the issue but many companies say it is not going fast or far enough.

BT said it had expected the AT&T licence to be granted and looked forward to competing with the company, which is already one of its greatest adversaries in international communications markets. But BT is understood to have put pressure on the Government to press its case for a public telecommunications licence in the US, which it applied for in April last year.

Mr Heseltine also agreed yesterday to grant a licence to Concert, the company set up by BT and MCI of the US to offer international business communications.

Earlier this week BT announced that Concert was open for business and had done a deal with a subsidiary of NTT, the Japanese telecommunications company, to market services in Japan.

The dollars 5.3bn alliance between BT and MCI was approved last month by the authorities in the US. It is thought this was the catalyst for Mr Heseltine's decision to agree to a licence for AT&T in the UK.

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