Soon-to-merge US communications companies MCI and WorldCom have announced plans for an alliance with Spain’s Telefonica de Espana, aimed at enhancing their presence in Europe, Latin America and the Hispanic market in the US. The three companies unveiled the scheme yesterday, announcing investments which Telefonica chairman Juan Villalonga called ‘insignificant’ in comparison with what his company would have been investing under last year’s failed alliance with MCI and BT, because it does not entail the partners buying into each others’ parent companies. What they will be doing, according to WorldCom president and CEO Bernard Ebbers, is taking stock in the companies through which they run businesses outside their home countries. Thus MCI WorldCom will take a 10% share, at market values, in TISA, which concentrates all of Telefonica’s holdings outside Spain, while the Spanish company will be acquiring a 10% stake, again at market values, in a company to be formed by WorldCom to handle all its European business, probably to be called EuroCom. At the operational level, meanwhile, Telefonica will be taking 49% of ‘all else we do in Europe or the East’, said Ebbers. WorldCom, on the other hand, will acquire 49% of Telefonica’s Panamericana network in Latin America. Separate treatment will be given to Italy, which WorldCom plans to enter soon. In that case, Telefonica will take a 46% share in the venture. The US Hispanic market, on the other hand, will be served by a new joint venture company offering products still to be developed. In the two largest Latin American markets, Brazil and Mexico, the partners have complementary strengths. Telefonica holds 35% of the operation in CRT, the phone company in Brazil’s southernmost state, Rio Grande do Sul, and will be competing for the state government’s 54.2% share when it comes up for auction in June, as well as eyeing other regional operators coming onto the market shortly. In that case, the idea will be for TISA to expand its Brazilian operations, the other alliance partners benefiting from their presence in its capital. Meanwhile MCI is present in Mexico via long-distance and would-be local operator Avantel, which Villalonga said Telefonica would be buying into. Roberts qualified his remarks, however, with the detail that MCI has recently frozen its investment program in Avantel while Washington and Mexico City decide whether the Mexican government needs to do more to honor its commitment to liberalize the country’s telecoms market, which would force telco TelTfonos de Mexico (Telmex) to lower its connection fees. Thus Telefonica’s buying into Aantel depends on the successful outcome of the negotiations between the two countries.
