Viag deal sees BT in Germany

BT plans to attack the German telecommunications market - the largest in Europe - through a joint venture with Viag, the diversified energy group.

The move, to be announced this morning at simultaneous conferences in London and Munich by BT and Viag, marks a dramatic escalation in efforts to break the grip of Deutsche Telekom, the German state monopoly and Europe's biggest telephone company. It also opens an important new stage in BT's strategy of setting up a global communications network.

Analysts speculated that the joint venture could eventually involve investments of more than £500mn as Viag extends its fibre optic cable network along its energy supply structure, which it will be able to use to offer long-distance telephone services tobusiness customers as soon as the German market is opened to competition.

Sir Iain Vallance, BT's chairman, has repeatedly called for greater competition in European telecommunications markets, and last November, European Union ministers set 1 January 1998 as the deadline for ending the monopolies on voice communication and the ownership and management of networks in the main member states.

All the big energy companies in Germany, including Viag, have been lobbying furiously to have Deutsche Telekom's monopoly lifted before that date.

"We must have our network in place, ready for when the monopoly falls, whether that is in 1998 or earlier," a spokesman for Viag said yesterday.

While announcing plans for the build-up of their own telecommunications networks in expectation of this liberalisation, the energy companies have been courting international partners with the know-how for the commercialisation of telephone services. In taking the fight directly into Germany, with a population of 80 million, BT is establishing a key Continental springboard for its European ambitions, stealing a march on its main rivals.

With a bloated workforce, Deutsche Telekom is scheduled for the first stage of privatisation in 1996, in an effort to raise capital to finance its plans to fight off the competition that will be unleased in 1998. The arrival of such a big player as BT inthe German market will underscore the urgency for Deutsche Telekom, and for the other energy utilities with telecommunication ambitions, of pushing forward their strategic changes.

Analysts estimate that the German telecoms market, currently worth around DM50bn, will double in value by the turn of the century.

For the period until the market is opened, the drive into Germany is expected to build on the line of services for businesses that have been developed by Concert, the joint venture between BT and MCI of the US. Concert aims to provide seamless telephone and other communications services for companies with sites and customers all over the world.