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To: Anthony Wong who wrote (2504)	5/28/1998 5:03:00 PM
From: Anthony Wong	Respond to of 11568

CNET news - C&W taps global telecom market By Jeff Pelline Staff Writer, CNET NEWS.COM May 28, 1998, 1:05 p.m. PT Cable & Wireless's buyout of MCI Communications' Internet backbone business marks one of its biggest forays yet into the U.S. market, a key outpost in the global telecommunications war. The telecommunications giant, which traces its roots back to the heyday of the British empire, is trying to recreate that clout and reach. The consolidation of the telecom industry in general is being brought on by deregulation and the merging of voice and data systems. But in this case, the seller--MCI--also is under pressure from antitrust regulators, who have expressed concern about the company becoming too powerful. (See related story) Competition for the English company is intense, however, from the likes of British Telecom, MCI-WorldCom, AT&T, Baby Bells such as SBC Communications, and others. Cable & Wireless's push into the United States has been under way for some time. According to sources, the telco has considered buying a Baby Bell, and also has toyed with the idea of joining forces with a high-speed Internet access provider like @Home. No such deal has been consummated, however. The telco is buying a network built by a Net pioneer. Under the terms of the deal, C&W will get all of MCI's 22 domestic nodes, 15,000 interconnection ports, more than 40 ongoing peering agreements, and equipment dedicated to supporting the system. The company also will acquire MCI's contracts with its Internet service provider customers--totaling more than 1,300 U.S. and international ISP customers in 76 countries. MCI's residential and non-ISP commercial customers are not affected by the deal. Cable & Wireless has undergone other major transitions. In 1979, for example, the telco was targeted as a candidate for privatization, a process that was completed in November 1981. The company now has operations in more than 50 countries on five continents. They are centered around hubs in Asia, the Caribbean, North America, and Europe. C&W, which employs about 37,000 people worldwide, was a pioneer in mobile communications, having built and operated the world's first cellular network in Qatar in 1978. "We have achieved double-digit growth in both revenue and profit, despite major strategic investments and adverse economic conditions in Asia," C&W chief executive Richard Brown said in the telco's latest annual report. "Our growth rate in revenue compares to just 7 percent two years ago." Analysts warn, however, that the intense competition in the telecom sector will only steepen going forward. Like Cable & Wireless, other telcos vying for market share in the communications space also are expanding rapidly through acquisitions. Business reporter Suzanne Galante contributed to this report. news.com

To: Anthony Wong who wrote (2504)	5/28/1998 5:06:00 PM
From: Anthony Wong	Read Replies (2) \| Respond to of 11568

CNET news - Is MCI's divestiture enough? By Dan Goodin Staff Writer, CNET NEWS.COM May 28, 1998, 1:45 p.m. PT Today's announcement that Cable & Wireless will purchase MCI Communications' Internet backbone service appears to be doing little to placate the raft of competitors, consumers groups, and governmental overseers who have voiced concern over MCI's proposed megamerger with WorldCom. C&W's purchase includes all of the equipment associated with MCI's wholesale Internet business, which sells services to Internet service providers and other resellers of Net access. According to a press release issued by both companies, the divestiture "addresses antitrust issues" raised in recent months by both the U.S. Justice Department and the European Commission, and "should clear the way for the swift approval of the MCI-WorldCom merger." Governmental officials were not immediately available to comment on the announcement, but analysts, consumer advocates, and competitors contacted for this story were skeptical that the deal would be far-reaching enough to blunt widespread criticism of MCI's proposed $37 billion merger with WorldCom. Since the deal was announced last November, these groups have warned that the merger would increase prices and disrupt a delicate balance among backbone providers that, thus far, has allowed the Internet to thrive. "The jury still will be out over whether this will be enough or if it's the first bargaining chip to placate" those opposed to the deal, said Craig Johnson, principal of the PITA Group in Portland, Oregon. He noted that the $625 million price tag for MCI's backbone business represents only a fraction of MCI's total Internet business. "This divestiture probably was the easiest piece for them to carve out, and probably was something they were going to have to do anyway," Johnson added, explaining that, in order for the companies to merge successfully, they would have to integrate a number of networks that employ different technical protocols. Under those circumstances, it would not be surprising for MCI to jettison certain incompatible or unprofitable parts of its infrastructure, he said. Representatives from MCI were not immediately available for comment. Other players in the Internet industry also were wary of the deal. "As a practical matter, Cable & Wireless looks like it will be a wholesaler of backbone services to MCI," said Mark Schechter, an attorney representing GTE in its lawsuit aimed at blocking the WorldCom/MCI merger. "It's a partial divestiture that creates the appearance of creating new competition, but it really doesn't create a viable, stand-alone business that's capable of competing effectively with MCI." Sprint, another Internet backbone provider that has voiced concerns over the proposed MCI-WorldCom merger, also has said that the sale to C&W does not appear to go far enough. "While the sale of MCI's ISP segment might reduce MCI/WorldCom's Internet infrastructure, it would do little to alter the anticompetitive Internet landscape that would result from the combination," Sprint said in a statement. "That can only be addressed by a complete divestiture of WorldCom's or MCI's Internet operations." Sprint is not the only group calling for a complete divestiture. James Love, director of the Consumer Project on Technology, which is affiliated with consumer advocate Ralph Nader, said: "If [MCI is] going to divest of their Internet facilities, it would be best if they sold all their Internet operations." Love and others said it would be difficult for MCI to completely divest itself of its Internet network, because the company has facilities that serve both its voice and Internet divisions. As previously reported, the Justice Department, the European Commission, and 15 state attorneys general are investigating the proposed merger. In addition to concerns that the merger might have an anticompetitive effect on the market for long distance phone services, the agencies' investigations also are scrutinizing the potential for the resulting combination to control too high a concentration of the Internet traffic flowing over the high-capacity lines that form the Internet's backbone. Under current conditions, backbone providers are forced to cooperate with their competitors by interlinking their networks. Opponents of the merger say an MCI-WorldCom combination will control so much of Internet traffic--between 45 percent and 70 percent by some estimates--that it no longer will have an incentive to enter into such "peering agreements." But not everyone believes MCI's sale will fail to satisfy government overseers' concerns. "I think this sale will satisfy the overlap regulators were concerned about," said Abhi Chaki, an analyst with Jupiter Communications. "With this thing divested, I think the coast is clear for the two companies to merge." news.com