Task force set to rule on telecoms take-over

Date: 23/01/1997

IN THE charged climate of current

EU-UK relations on competition dossiers, European Commission officials are due to give their verdict within a week on the biggest ever transatlantic take-over deal.

In the past few days, merger regulation officials have been finalising their thinking on whether serious competition problems are posed by British Telecom's (BT) purchase of the outstanding 80&percent; of US counterpart MCI not already in its hands.

Such doubts would force the deal to be taken into a second-stage four-month merger investigation and signal that the Commission wants to force changes to the take-over or, as a last resort, ban it outright.

Tension between the UK and Brussels has already been heightened by Competition Commissioner Karel van Miert's warning that he will take London to court if it clears the alliance between British Airways and American Airlines along the lines proposed.

Officials from the Commission's task force have sifted through submissions on the BT/MCI deal from other interested companies, with US telecoms market leader AT&T making it clear it has missed no opportunity to make its views known.

AT&T said its submission to the Commission stressed two issues: the fact that its UK phone subscribers had to dial a special code to access the AT&T service (failure to do so means they are connected to BT) and that phone users only have a limited opportunity to keep their phone numbers within a local area if they switch companies. Easy number 'portability' paves the way for competition between firms.

However, most industry observers believe BT/MCI will not be kept waiting long for clearance and dismiss any suggestion that the deal will be blocked.

BT reckons it has an unimpeded line to clearance. Most of the competition spadework was carried out in 1994 when the Commission authorised Concert, the worldwide joint venture between BT and MCI.

Four years on, BT reckons the arguments for approval are even stronger. Access to the UK telecoms market has become even wider with around 40 companies licensed to provide telecommunications services, including such giants as AT&T.

Some guarantees about transatlantic telecoms capacity and fair treatment of competitors might be requested by the Commission, but BT says that here it would be pushing at a door already opened by UK regulators.

The real test for whether a merger or take-over should be taken into a second-stage in-depth investigation is whether the deal seriously challenges the principle of fair competition. BT insists it does not.

Some observers even suggest that the usual denunciations from BT's rivals will be half-hearted and more in form than substance.

They suggest many more could soon be following BT down the same road to substantial share stakes in partners.

Telecoms analyst Erik Thyssens, of Banque Bruxelles Lambert, has few doubts that the Commission will clear the deal.

“It would be astonishing if it put a barrier in the way,” he said. “The Commission has tried to act as a locomotive for telecoms liberalisation and this deal appears to be going in the right direction.”

John Clarke, of the Daiwa Institute of Research, agrees. “There is no particular reason why the EU should block the deal. MCI has a very limited presence in Europe. I would have thought if there were any problems they would be technicalities rather than fundamental,” he said, adding: “The US Federal Communications Commission (FCC) is likely to be far more of a problem than Brussels.”