Global Telecom Heats Up
The FCC's approval of Sprint's alliance with two foreign monopolies is seen as a strategic business move to some and an unfair advantage to others
P> The global telecommunications marketplace just got a lot hotter.
Last month, the Federal Communications Commission, after weighing the decision for many months, gave permission to France Telecom and Deutsche Telekom to buy 20 percent of Sprint Corp., Kansas City, Mo. The three companies announced their plan for a global alliance in which FT and DT each would acquire up to 10 percent of Sprint on June 14, 1994.
The deal will let Sprint leap ahead of its U.S. competitors in the growing international telecom market because the two foreign companies are monopolies in their countries, opponents of the venture pointed out. Theoretically, the alliance gives Sprint a monopoly over those markets, making it difficult for AT&T, Basking Ridge, N.J., MCI Telecommunications Corp., Washington, D.C., or any other telco to join the game.
In separate responses, AT&T said it supported the FCC's decision, but MCI vehemently opposed it.
"[The decision] provides a large incentive for France Telecom and Deutsche Telekom to discriminate against competitors of the U.S. partner, Sprint," said James L. Lewis, MCI's senior vice president for regulatory affairs.
The approval, however, is subject to several strict conditions designed to protect the U.S. telecom market against monopoly power in France and Germany. Right now, both FT and DT control the market in their countries, which the FCC said would give Sprint an unfair advantage over other American companies forming global alliances.
However, the FCC said that negative was outweighed by a planned liberalization of the French and German telecommunications markets by 1998 and the competitive benefits the United States will reap from the $4.2 billion investment in Sprint. Sprint must file a report with the FCC by March 31, 1998, detailing France and Germany's competitive telecom opportunities. If the agency decides the European countries do not meet that goal, it can challenge the approval.
MCI's Lewis said he doubted the two monopolies, which are government-owned and not subject to independent government regulation, will open their markets to competition.
Sprint is expected to use the capital to expand and upgrade its network. It also will use the money to fund personal communications services ventures, driven by a new wireless technology. In addition, the partnership has created Phoenix, a subsidiary that will sell basic telecom services to international corporate customers.
Sprint said now that it has cleared this U.S. regulatory hurdle, it will deliver international telecom service through the partnership this year. "Unlike other alliances, the three companies are forming a truly new company to provide these services, not just forming a product management or joint marketing agreement," a Sprint spokesperson said. The group still must get permission from the European Union, which is expected this year.