Revealing one of the best-kept commercial secrets in a long time Cable & Wireless Plc yesterday announced that its chosen partner for Mercury Communications Ltd is Canada’s biggest company, Toronto-based BCE Inc, parent of Bell Canada Inc, 52% shareholder in Nothern Telecom Ltd and owner with it of Bell Northern Research. BCE will pay ?480m for 20% of Mercury and Cables will pay ?30m for what will become a 20% stake in in BCE’s UK cable television interests. Tbe deal, due to be completed in January should help Mercury get direct access to those all-important residential and small business customers, particularly in London – BCE owns 30.7% of cable company Videotron Holdings and 80.4% of East London Telecommunications which together hold 14 franchises in the Capital. It will also dramatically reduce Cable & Wireless debt, with gearing dropping to around 6% from 40%, and enable the company draw up the resources of BCE’s research arm. Though C&W will be retaining management control of Mercury, Jacques Berube, president of BCE said that his company intended to take an active role in its business. The Canadian gets the right to appoint two directors to Mercury’s board and another executive to the company’s chief executive’s committee. Berube said that Mercury in itself is an attractive investment but more than that it complement’s BCE’s existing UK cable business which concentrates on offering services to residential and small business. A third of Mercury’s new residential customers are already being connected via cable, with the rest relying on indirect access via British Telecommunications Plc’s local loop. The alliance is seen as the opportunity for Mercury to provide more than a simple telephone service: it provides the potential for broadband to the home for multimedia services said chief executive Mike Harris. Both also have an eye on expanding Mercury’s services onto the continent should the Community manage to convince its members to open their telephony markets. The mooted alliance with AT&T Co was eventually rejected by C&W’s executive chairman, Lord Young, on grounds of AT&T’s lack of any local-loop access in the UK, while the US West Inc talks were scuppered when Cables realised that it could upset the rest of the the Baby Bells, jeopardising a number of joint ventures with several of them around the world. Lord Young denied that the move was a prelude to Mercury being floated on the stock exchange; BCE does not have any options to buy further shares and the deal prohibits the two companies from buying each others shares for five years, unless a hostile bid is launched by a third party. Mercury’s Harris said that his company’s relationship with switch manufacturer Nothern Telecom would continue to be on an arms-length basis. This is BCE’s second major foray into Europe – and second major deal with Cable & Wireless: in the mid-1980s, it tried to become a major player in computer maintenance, and to that end took a lot of odds and ends of businesses that Cable & Wireless did not want; after growing losses, it sold out to Bell Atlantic Corp retired hurt (VI No 806) before returning to pick up its UK cable TV franchises.
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