British Telecommunications Plc and MCI Corp are still maintaining their joint wall of silence over negotiations on their proposed merger, and in the absence of any announcements, attention is now focusing on what hasn’t been said. BT is widely regarded as having offered too much for the US long distance carrier, and since MCI announced that it would incur losses of $800m this year in its attempts to break into the US local call market, BT’s shares have fallen 98.5 pence to 379 pence. Major BT shareholders have been hounding BT executives for a re-negotiation of the terms, but the latest filing of MCI’s quarterly results with the Securities and Exchange Commission hints otherwise. There is no mention in the document of any impending change in the structure of the deal. MCI’s shares are trading on the expectation that the deal will go ahead, and under US law, any pertinent information which has not yet been disclosed should have appeared in the August 14th filing. Many observers now believe that MCI’s directors are confident of an unchanged deal despite the extensive review of MCI’s business which BT has instigated following the July profits warning. The report is due at the end of this month, but a recent article in the UK paper The Observer claims that British Telecom missed crucial warnings from its advisors Rothschild’s about MCI’s business. A report from Rothchild’s flagged concerns about overly optimistic assumptions on the cost of entry into local US telecoms markets and hence BT cannot claim to be surprised by the revelations, which cuts down on its room for re-negotiation. BT currently owns 18.7% of MCI and the terms of BT’s offer for the remaining shares, values MCI at $28bn, giving a premium of 20% over MCI’s current share price.
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