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British Telecommunications, MCI Communications Corp and Telefonica de Espana made a joint statement yesterday in a bid to reassure Telefonica shareholders that WorldCom’s recent bid for MCI has not jeopardized the Spanish telco’s global future. In a bid to halt the slide in Telefonica de Espana’s share price, all three companies wheeled out quotes with both MCI backing their alliances with Telefonica but mentioning nothing of the BT/MCI planned merger now under threat from WorldCom. The only reference was a cryptic The BT-MCI merger has received all necessary regulatory approvals from European and US regulatory authorities. Telefonica shares fell 130 pesetas, or 2.8%, to 4,450 in trading on the Madrid Stock Exchange yesterday; down 5.7% since the WorldCom announcement last Wednesday. Earlier this year, Telefonica and MCI agreed to co-operate in Latin America where Telefonica already is the biggest foreign telephone operator. This agreement was part of a broader agreement to become a partner with both MCI and British Telecom Plc in their proposed Concert alliance, now jeopardized by the WorldCom offer. In order to join Concert Telefonica had quit its existing global partnership with AT&T Unisource WorldPartners program. The Concert agreement included a share swap between Telefonica and BT-MCI, which would have left Telefonica with a stake of Concert. In the joint statement Sir Iain Vallance, Chairman of BT said BT reaffirms its commitment to partnership with Telefonica, which it considers a strategic asset for the group. We expect this partnership to have long term benefits for both companies, their customers and shareholders. Bert Roberts, Chairman of MCI, said: The strategic relationship with Telefonica is important for MCI. MCI is working successfully with Telefonica in Latin America and regards Telefonica as the best possible partner in that region. Should the WorldCom bid for MCI succeed, and the Concert alliance collapses, Telefonica could still go ahead with an alliance with the new MCI in Latin America. However, this could also mean a that BT walks away from the merger plans with additional financing from its 20% ownership in MCI, and a freedom to compete against Telefonica in its home market. BT owns more than 15% of Spanish cellular phone company Airtel SA and also controls a data transmission unit that competes with Telefonica. The WorldCom deal was poorly timed for Telefonica as the Spanish government is preparing to issue third basic telephone license that would give BT the opportunity to compete directly with Telefonica should their alliance collapse.

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CBR Staff Writer

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