<A> BARRON'S: Review & Preview Follow-Up -- A Return Visit To Earlier Stories: Cyber Shuffle: Cable & Wireless Agrees To Buy MCI's 'Net Business
By Richard Evans
Cable & Wireless, the British telecommunications giant, plans to buy MCI's booming Internet business for $625 million.
The deal -- which faces opposition from GTE -- would make Cable & Wireless a major player in the fast-growing, fiercely competitive U.S. market for Internet communications. MCI's Internet operations are expected to generate $220 million in revenues this year on assets of $100 million. The U.S. is home to 70% of the global Internet market, which is expanding by around 50% a year.
The acquisition would resolve some questions surrounding the planned acquisition of MCI by WorldCom. The sale announcement came Wednesday, just days after European Union antitrust chief Karel Van Miert had warned that any overlap between MCI and WorldCom in the Internet business should be eliminated.
"The Internet is the world's fastest-growing telecommunications market," affirmed Cable & Wireless CEO Dick Brown. "This transaction catapults us into the world league of Internet and data traffic carriers."
GTE, in a letter to the Justice Department, contends that the value of MCI's Internet business might really be more than $4 billion, raising the issue of just what assets are being shifted and how much Internet capability would be left with MCI.
The transaction, according to the two parties involved, would transfer ownership of MCI's "backbone" Internet business, used by Internet service providers to provide connections for retail customers and businesses, to Cable & Wireless. MCI serves more than 1,300 U.S. and international Internet service providers in 76 countries.
The deal could bolster Cable & Wireless's fledgling U.S. business, as well as diminishing the group's reliance on Hong Kong and other Asian telecom markets. The group's strengths in those markets, as well as its recent announcements of solid earnings and profit growth ("Foreign Affair," May 18), have aroused speculation that C&W may attract a takeover bid from a major U.S. phone company. The company has held informal merger talks with both AT&T and Bell Atlantic. |
