WorldCom Seen Buying U.K. Phone Capacity to Put Dent in BT
Bloomberg News
August 10, 1998, 12:41 p.m. ET
WorldCom Seen Buying U.K. Phone Capacity to Put Dent in BT
London, Aug. 10 (Bloomberg) -- WorldCom Inc., is poised to
expand its U.K. coverage by buying or leasing high-speed fiber-
optic lines from Racal Electronics Plc in a move to chip away at
British Telecom's business, analysts say.
WorldCom, the Jackson, Mississippi, telecommunications
company, said it is in ''very advanced stages of discussions''
to use Racal's unused network capacity. Racal said it was likely
WorldCom would lease the lines for ''a long-term, perhaps in the
order of 20 years.''
The move is seen as part of WorldCom's strategy to become a
dominant player in Europe by providing local telephone access as
well as long distance services. By leasing Racal's lines which
run across Britain's railway lines, it will be able to extend
its services beyond London to throughout the U.K.
''Given the scale of WorldCom's business and ambitions in
Europe, this will mean more traffic and a higher corporate
profile,'' said Mark Davies-Jones, an analyst with Salomon Smith
Barney in London.
He added that WorldCom was a company that ''liked to own
its assets and what might start out as a deal to own capacity
might build up to a pooled investment of some sort.''
BT last month announced a planned $3 billion venture with
AT&T, the No. 1 U.S. phone company, to offer voice, data and
Internet services to large companies around the world.
Racal IPO
Last week, Racal said it would consider selling its
telecommunications services unit or listing it in an initial
public offering by the end of next year. A sale of excess
network capacity would increase the value of Racal's Telecom
unit, currently estimated to list for between 750 million and
800 million pounds ($1.3 billion.)
On Aug. 6, WorldCom said it would take a charge of $6
billion to $7 billion to account for research and development
acquired with the $47.2 billion purchase of MCI Communications
Corp., the largest telecommunications industry acquisition ever.
In July, it announced a plan to extend its voice and data
network across Europe, which in turn is linked with the U.S.
through an transatlantic cable system.
''We are talking with Racal to give us a national backbone
across the U.K.,'' said Mark Weeks, head of corporate
communications at WorldCom U.K.
Racal's shares rose 6.5 pence, or 1.69 percent, to 390
pence. WorldCom's shares dropped 1/8, or 0.24 percent to 52
1/16.
--Bundeep S. Rangar in the London newsroom (44-171) 330-7053/pg |
