ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, November 5, 1996 TAG: 9611050087
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: NEW YORK
SOURCE: DAVID E. KALISH ASSOCIATED PRESS
PHONE COMPANIES such as Sprint and AT&T are making lucrative overseas deals themselves.
Bell Atlantic's chairman and chief executive, Ray Smith, was working in his Washington office when a corporate staffer from down the hall confirmed the electrifying news.
MCI was in takeover talks with British Telecom, according to the wire report handed to Smith Friday afternoon. Yet Smith seemed unflustered - even though the deal would create a phone foe rivaling Bell Atlantic's proposed $23billion marriage with Nynex, another regional phone company.
Smith said Bell Atlantic's ``reaction should be, `We hope it teaches [MCI] better manners,''' recalled the staffer, Eric Raibe. ``They've been pretty rough and tough lately, and the Brits are known for their genteel'' ways.
To be sure, MCI and other long-distance phone companies already are feverishly going beyond their core businesses, spending billions to build local and mobile phone networks and push such services to consumers and businesses. Many are merging and partnering with other companies.
To what extent MCI will intensify its efforts with the help of a deep-pocketed, if more staid, British parent was the subject of enormous speculation by corporate chiefs around America on Monday. But MCI rivals - particularly AT&T Corp., the No.1 long-distance carrier with the most to lose from an MCI marriage - aren't waiting to find out.
Intensifying the rivalry are new U.S. reform rules that make it easier for long-distance carriers, regional phone companies and cable TV companies to compete on each other's turf.
One of the main battlegrounds with a newly energized MCI-British Telecom will be in overseas markets for multinational corporations, which demand all-in-one packaged services that combine traditional local, long-distance and other communication services in one contract.
Thus far, though, many of AT&T's overseas alliances have been with smaller companies that cannot deliver the powerful resources of huge European entities such as British Telecom, said Joseph Kraemer, head of the communications and electronics practice at A.T. Kearney, a management consulting firm.
``I would suggest they should look at their global partnership and say, `Why can't they cut deals with other large companies,''' Kraemer said.
To some rivals, British Telecom's agreement to take over MCI in a $20.8billion deal seems little more than the latest in a steady drumbeat of multibillion dollar mergers and acquisitions.
Sprint Corp., the other major U.S. long-distance company angling for new business abroad, this year sold a combined 20 percent stake to Deutsche Telekom and France Telecom for $4.1billion.
Despite speculation that the companies may try to increase their stake in Sprint in response to the MCI deal, Sprint president and chief operating officer Ron LeMay said in a telephone interview that such a move was not being considered.
Stephanie Babich, a telecommunications analyst with Fitch Investors Service LP, said the MCI merger proposal will pressure long-distance carriers to cut prices for international calls. Rates have been creeping up in recent years after initially declining after the court-ordered breakup of AT&T's telephone monopoly in 1982, which separated long-distance from local phone companies and granted all long-distance carriers equal access to customers.
``That's really where the competitive price pressures are going to be,'' Babich said.
LENGTH: Medium: 73 lines ILLUSTRATION: PHOTO: AP. 1. Telecommunications competitors probably wish theyby CNBcould be a fly on the wall inside the corporate headquarters of MCI
Communications Corp. in Washington, D.C. 2. MCI Chairman Bert
Roberts (above) answers questions from the press regarding his
company's $20billion merger with British Telecom. color.