AT&T demands more UK access

Telecoms giant wants US regulator to insist on concessions in exchange for BT merger with MCI

AT&T, the US telecoms giant, is pressing US regulators to demand major concessions over access to Britain's telecommun- ications market as a price for allowing the pounds 35bn merger between British Telecom and MCI to go ahead.

Concert, the combined holding company of BT and MCI, is expected to make an application to the Federal Communications Corporation within the next few days to waive the statute laid down in the 1934 Telecommunications Act restricting foreign corporations to a maximum of 25 per cent of any American communications company.

AT&T's lawyers are expected to lobby vociferously for more access to the UK market during the public consultation process that follows such an application. In particular, AT&T is seeking:

n The approval of its application for a licence to provide its own international facilities for calls to and from the UK. n Access to BT cable installations and networks at cost, and the opportunity to put its own switching facilities in the BT cable installations.

n The removal of the three digit code that customers must dial before their calls can be routed via a network other than BT's.

The company said it would not demand the break-up of BT's residential services, where it currently dominates with around 90 per cent of the market.

"We believe that competition can only come when we are not paying BT to lease its lines and boost its profits," said Niall Hickey, a spokesman for AT&T in the UK. "At the moment we are negotiating with one hand tied behind our back."

Mr Hickey said that the concessions over this deal would set the tone for telecoms deregulation throughout the world: "This one is really important to us - we want it to be the model for the rest of Europe."

Analysts in the US predicted that the FCC would not object to the BT- MCI merger on competition grounds, as it would increase competition in the US market, but it would look to open the British market further to competition.

But they added that the AT&T demands looked to be a sign of fear within the US giant that Concert would use BT's ability to fund large capital projects out of its cashflow and MCI's proven ability to pry open monopolistic markets to launch an assault on continental Europe and the Commonwealth, where the telecoms markets are only now flirting with deregulation.

"The story that really hasn't been told yet is what MCI is bringing to the party," said Larry Darby, a former FCC and Lehman Brothers executive who is now an independent telecoms analyst.

"They have big ambitions, and have shown in their 20-year fight with AT&T that they can force markets open. But until now they haven't had the money to pursue those ambitions. BT has a lot of cash and has nowhere to go in those markets. So strategically it looks good, and tactically it's shaping up nicely too."