SBC puts market in extended state of suspense (gam)
Janis Mackey Frayer
It is the question that could pester Canadian markets for the next 44 trading days: Will SBC Communications exercise its put option to heave back its 20-per-cent stake in Bell Canada come July 1? That's when its six-month window of opportunity to pull the trigger opens. The answer could very well be found in the festering, smelly mess that is America's telecom industry and the extent to which SBC wants to play janitor. At the top of the dumpster these days is WorldCom. Once a sizzler, the Deep South stinker is now in a "precarious position and at risk of breaching covenants," suggests a financial analyst. Yet, beyond the crumby weak balance sheet, WorldCom boasts a national U.S. long distance presence and Internet backbone facilities that stretch into Canada. If SBC made a move for WorldCom and its Canadian berth, a telecom watcher suggests the folks in Texas "may rethink the need for any strategic relationship with Bell." Another scenario was dialled up a few weeks ago, when SBC was rumoured to be making a run for AT&T. One source is pleased to juice up this speculation, with some good ol' fashioned firsthand eavesdropping. While visiting the San Jose offices of Cisco Systems in December, this person overheard a "Wall Street-type woman" (official description) talking about SBC actively "knocking on a lot of doors in Washington." The company was said to be testing the political and regulatory impact of a bid for AT&T with the Department of Justice and the Federal Communications Commission. However, to keep the antitrust guns firmly holstered, analysts suggest SBC might nibble only at AT&T's business long-distance segment and wireless properties. Both of those assets have strong market ties in Canada, including a stake in Rogers Wireless (which operates on an entirely different network from Bell Mobility). Again, the telecom analyst says that, if this played out, SBC might "question the efficacy of maintaining its Bell investment." At a news conference this week, BCE chief executive officer Michael Sabia insisted SBC has made no decision. Mr. Sabia added that he is in regular contact with the OK-telecom-corral and "come what may we are prepared." |
