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To: Anthony Wong who wrote (3023)	7/27/1998 1:20:00 AM
From: Anthony Wong	Read Replies (2) \| Respond to of 11568

AT&T-British Telecom Alliance Will Face Regulatory Scrutiny in EU, U.S. Bloomberg News July 26, 1998, 7:38 p.m. ET London, July 27 (Bloomberg) -- AT&T Corp. and British Telecommunications Plc's plan to form a global phone venture will face tough scrutiny from regulators both in the U.S. and Europe, analysts said yesterday. AT&T and BT, the No. 1 U.S. and British phone companies, announced yesterday they will form a venture to provide voice, data and Internet services to large global corporations. The venture will have assets of $3 billion, annual sales of $10 billion and grow at more than 15 percent a year. Due to the venture's size and the dominant position of the parent companies, the European Union and the U.S. Justice Department will take a close look at whether the venture has an unfair advantage over competitors such as the Global One venture between Sprint Corp., Deutsche Telekom AG and France Telecom SA, analysts said. ''I'm expecting a rocky ride for this one,'' said Ken McGee, an analyst at Gartner Group in Stamford, Connecticut. ''I would not be surprised if the EU asked these two players to cough up some assets as they did with WorldCom.'' Regulators' Toolbox EU officials weren't available to comment. Justice Department officials declined comment. A spokesman for the Office of Telecommunications in the U.K., which also must approve the venture, wasn't available for comment. WorldCom Inc., the No. 4 U.S. long-distance company, plans to acquire MCI Communications Corp., the No. 2 U.S. long- distance phone company. In order to get regulatory approval from European regulators, MCI-WorldCom had to sell MCI's Internet assets. ''Regulators have learned that mergers and alliances are a way of exerting control to get what they want,'' said Jeffrey Kagan, president of Kagan Telecom Associates in Atlanta. ''It's a new tool in regulators' toolbox.'' The venture will compete against major international alliances already formed between Deutsche Telekom, France Telecom and Sprint Corp. and WorldCom, MCI and Telefonica de Espana. Asset Sales AT&T and British Telecom said they will both have to exit existing alliances. BT will buy back MCI's stake in Concert and will make AT&T a non-exclusive Concert distributor in the U.S. AT&T will add extra services to Concert and sell under the AT&T Concert name. AT&T's WorldPartners alliance, which links AT&T with 18 partners outside the U.S. and Europe, will not be extended beyond the end of 1999. AT&T will also drop its alliance with Unisource NV, a joint venture of the Swiss, Swedish and Dutch national phone companies through which it had served business customers in Europe, by July 2000. Still, AT&T and BT may have to sell some assets to get regulatory approval, analysts said. ''I would imagine you will see (regulators) squeezing whatever pound of flesh that they can out of the deal,'' said Kagan. The agreement with BT will help AT&T better serve its biggest, most lucrative business customers by connecting their offices worldwide. It also gives BT, which failed last year to buy AT&T rival MCI, an important ally in the crucial U.S. market, home to about 40 percent of the world's multinational companies. ''The regulatory issues here are going to be really quite substantial,'' said Jim Ross, an analyst at ABN Amro in London. ''Strategically, there's no question this is a very powerful company that's being created.'' --Colleen McElroy in the Princeton newsroom (609) 279-4069 with