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April 1, 1996


By CBR Staff Writer

British Telecommunications Plc was really caught on the hop by Cable & Wireless Plc’s announcement of exploratory merger talks. At 6.27 pm GMT on Thursday it said tersely that it was not making any comment on the statement; by 7.43 pm it was confirming that it was indeed holding exploratory talks with Cables. Why does a merged British Telecommunications Plc-Cable & Wireless Plc have to sell Mercury Communications Ltd? The idea of making a vast pay-out of cash in the form of a dividend to the shareholders of both companies on any merger looks politically pretty inept, so why not hand some of any cash over to strengthen the Mercury balance sheet and leave the company to sink or swim as an independent by distributing the entire equity to the shareholders of the merged British Telecom-Cables – the shares would trade on a rich multiple on the expectation of a bid, and the distribution would have hardly any effect on the parent’s share price? And everyone is assuming that a merged British Telecommunications Plc-Cable & Wireless Plc has to sell the 50% of Mercury One2One Ltd held by Cables, but why not hang on to the embryonic but growing One2One with its all-new technology and instead sell Telecom’s 60% of the mature Cellnet Mobile Communications Ltd, which has to make the analog-to-digital transition? – the regulator might even allow the enlarged British Telecom to go all the way and take 100% ownership of a player that’s as weak as One2One.

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