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Technology Stocks : Vodafone-Airtouch (NYSE: VOD) -- Ignore unavailable to you. Want to Upgrade?

To: David Wiggins who wrote (895)	3/20/1998 8:32:00 AM
From: Roy F	Read Replies (1) \| Respond to of 3175

More takeover/merger speculation... FOCUS-BT on a roll as bid talks fails to fade March 20, 1998 08:11 AM By Kirstin Ridley LONDON, March 20 (Reuters) - Shares in British Telecommunications Plc surged to fresh year highs on Friday on the second day of frenetic trade amid rekindled hopes of an imminent U.S. deal -- possibly with local carrier Bell Atlantic Corp BEL . Fuelled by comments from finance director Robert Brace, who reiterated at a telecoms conference in New York on Thursday that BT was in talks with potential U.S. partners, traders sent the stock another 8p higher to 693p by early afternoon. "There is a general feeling that BT will do something," said one dealer. "The whole sector is also very strong on expectations that there will be some consolidation." Analysts have expected BT, which needs access to the key U.S. telecoms market to satisfy its global aspirations, to forge new links across the Atlantic since its planned merger with U.S. long distance carrier MCI Communications Corp MCIC failed last November. But some were baffled by the share price reaction, despite Bell Atlantic chairman and chief executive Raymond Smith's comments earlier this week that the group might forge an international partnership by the end of the year. "I feel this is all rather strange -- especially in light of the fact that the market, and BT shareholders, didn't like the MCI deal. Yet the shares race ever higher on the possibility that it's going to go back into the U.S. at no doubt a much higher price," said one analyst. "Logic -- who needs it?" But while BT remains determined to take a share of the $200 billion U.S. telecoms market, analysts have tipped not only Bell Atlantic as a possible partner, but regional carriers SBC Communications Inc SBC , Ameritech Corp AIT , AirTouch Communications Inc ATI , GTE Corp GTE or mobile groups. However, it remains unclear whether any such alliances would prove as compelling as a merger with MCI, which BT had called its rite of passage in the booming $650 billion global telecoms market. John Tysoe, telecoms analyst at SocGen, said the main point in BT's favour was its flexibility. "I think it's not beyond the wit of man to come up with some sort of solution to their north American strategy problem. And clearly Bell Atlantic is a company they would be very interested in doing business with." The so-called Baby Bell company, which serves the east coast region stretching from Maine to Virginia, handles around 40 percent of transatlantic traffic in its franchise areas and has a fair share of high-margin corporation business, analysts said. "It's an obvious partner for both BT and (UK rival) Cable and Wireless Plc ," agreed Tressan MacCarthy, telecoms analyst at Credit Lyonnais Laing. "And I would guess both of them are having talks with it. "But Bell Atlantic has a 100 percent market share in its franchise area and (amid increasing competition) the only way is down." Having been dumped at the altar by MCI, who opted to merge with acquisitive U.S. long distance carrier WorldCom Inc WCOM instead, BT has cashed in its 20 percent MCI stake. The deal, coupled with a $465 million break-up fee, will add almost $7.5 billion to BT's war chest when WorldCom's merger is complete. But the British company is a known predator and could be hampered by the high ratings of potential targets' shares, U.S. companies' sheer size and few clear synergies. In the meantime, BT remains a domestic carrier with an aggressive European strategy -- but in need of further Asian partners and without a bridge-head in the U.S. ((London newsroom, +44 171 542-7987 fax +44 171 583-3769, uk.equities.news@reuters.com)) REUTERS