Late Arrival Disrupts Plans For Concert

The cornerstone of British Telecommunications' global strategy is threatened by the WorldCom bid for MCI.

If the deal goes through on the announced terms, BT would end up owning some 10 per cent of the enlarged group through its existing 20 per cent stake in MCI.

BT and MCI are, however, already linked through joint ownership of their global alliance, Concert (known colloquially as Concert Classic, since Concert plc would have been the name of the merged company).

Concert Classic is fundamental to the international ambitions of BT and MCI. Owned 75 per cent by the UK group and 25 per cent by MCI, it is run by a BT executive, Peter Manning, and has its headquarters in Reston, Virginia.

The joint venture is generally reckoned to be the leader among a small number of strategic alliances set up by the world's larger operators to capture the business of large, international customers.

This market is worth more than $10bn a year and is a large source of revenues and profits for telecoms operators. In addition to Concert, there is Global One, formed by Deutsche Telekom, France Telecom and Sprint of the US, and World Partners, led by AT&T. Cable and Wireless of the UK has a international network capable of linking multinational companies. Concert has some 3,500 customers for its services, which include technically advanced products such as virtual private networks and flexible billing. It is expected to have revenues of about $1bn this year with an order book of some $1.8bn. What will happen to Concert Classic if WorldCom is successful in its bid? There are, after all, thousands of customer contracts to be honoured and commitments to be met. In theory, there is no reason why the joint venture should simply not continue with new parents - BT and WorldCom. As such, it would simply be one more of the hundreds of strategic alliances which have been formed over the past few years. Whether this would suit BT (which has no liking for partnerships where it does not have control) or WorldCom (which prefers takeovers to alliances) is another question. Analysts believe the Concert agreement must include a clause that, in certain circumstances, would allow one of the partners to buy the other out. That could leave BT free to pursue its global ambitions with other partners, and WorldCom to focus on the US market. Copyright Financial Times Limited 1997. All Rights Reserved.