Following Thursday’s news from MCI Communications Corp that the failure of state and federal regulators to enforce open competition rules would mean losses for this year of up to $800m and next year even more, speculation was rife Friday that British Telecommunications Plc, whose acquisition of MCI is in its final stages, would want to re-negotiate terms. BT’s American Depositary Receipts (ADR) shares took a beating on the New York Stock Exchange early in the day – at one point they were the third biggest percentage loser on NYSE, after being mauled on the London Stock Exchange – 2 million pounds was wiped off the company’s capitalization. Some nervous MCI shareholders reportedly stayed up all night awaiting news from London. All BT would say is that it has not ruled out reviewing the terms of the acquisition. However, analysts seem to think such a move is highly unlikely, especially since the deal would be such a good strategic move for BT, enabling it to escape the bonds imposed on it in the UK by the regulator as the dominant carrier, and spread its wings internationally. Chief executive Sir Peter Bonfield said last year the deal would enable the company to prove it was an exciting fast-moving high technology company rather than just a dull old utility. The general consensus on both sides of the Atlantic seems to be that the merger will only be good for competition. Earlier this month the chairman of the Federal Communications Commission Reed Hunt said the move would fuel competition in the US local call market (CI No 3,196). And although MCI is having a harder time getting into this market than expected, it seems unlikely British Telecom will rock the boat now. MCI’s shares closed down $7.375, or 17.4% at $35.00, while BT closed down $5.25, or 6.4% at $76.3125.
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