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Technology / AI and automation

BT SILENT ABOUT FUTURE AS MARKET ACCEPTS WORLDCOM-MCI DEAL

British Telecommunications Plc is becoming famous for its inability to communicate whenever it faces a crisis. But it will have to show its hand soon or events will overtake it in the wake of the WorldCom Inc bid for MCI Communications Corp which has shattered BT’s whole strategy for entering the US market. In the short term, BT’s shares have responded well to the news – but UK institutions are renowned for short-term views and, for the moment, can only gloat at the profit BT will make on its 20% MCI holding and a possible $450m pay-out as a result of the ‘golden handcuff’ agreement with MCI. But the real concern over BT is its long-term ambitions to be a global player in the telecommunications business. Over the past five years, it has made 50 alliances in 44 countries. But it is its failure to make the really big deals that puts a question mark over the company’s management. Last year, merger talks with Cable & Wireless Plc broke down after BT failed to put enough money on the table to tempt the C&W board. Now the likely failure of its latest bid follows the way BT was taken by surprise when MCI issued a profits warning in July and the prolonged re-negotiation of terms of the deal. Where does BT go now? Officially the MCI bid is still on – though no-one believes for a moment it will succeed. And WorldCom has started court action to try and remove the penalty payment MCI must make if it fails to merge with BT. It is still open to BT to enter a three-way pact with WorldCom and MCI which would instantly strengthen its Concert international alliance whose future would equally be threatened if it ends with nothing but money from the MCI deal. BT could, of course, start all over again and seek another US acquisition. But the credibility of the BT board has been badly dented over the whole affair. In the circumstances, it is not surprising that analysts see it increasingly likely that this confused British giant – way out of its depth in the big time – will drift into the arms of AT&T Corp.

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CBR Staff Writer

CBR Online legacy content.