Asian Business Has Nice Ring to Concert

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Asian Business Has Nice Ring to Concert

The behemoth stalks the world's most lucrative telecom opportunity

By Shannon Henry

Staff Writer

As two of the strongest telcos in the world merge into a powerhouse - MCI Communications Corp. and British Telecommunications plc - a new era in global telecom is about to start.

While those companies' home countries have had open markets for some time, a push is on to wrest state-controlled telecom monopolies from governments throughout Asia, Europe and Latin America.

According to industry analysts and statistics, the greatest market opportunity now is Asia. The Asia-Pacific area will account for 40 percent of global telecommunication infrastructure and service development at least until 2000, one group said.

The World Trade Organization is nearing a Feb. 15 deadline to reach an agreement to open what is estimated to be the $500 billion global telecom market. In the meantime, telco executives are scrambling to put together international business plans compatible with whatever the WTO decides.

The time is ripe for Concert, which will be the combined company's name, to use its collective expertise in showing everyone else how it is done while gaining from strategic partnerships around the world.

The MCI-BT merger will set a precedent for the new global phone company that, like an octopus, will stretch its arms around the world. The deal is expected to be closed by fall of 1997 after approvals from the Federal Communications Commission, the Department of Justice and the European Commission come through.

"The plan is to offer services in competitive markets around the world," said Jonathan Sallet, MCI's chief policy counsel, in an interview with reporters.

The British and American markets have much in common in telecom already. "What's striking is that they are so similar," said Sallet. "These are the two most open markets in the world. They are leading the nations in the world," he said.

Swedish and Finnish markets have followed most closely, said John Butler, director of regulatory affairs for BT. In addition to traditional telecom, BT and MCI together carry 40 percent of the world's Internet traffic.

Earlier this month, another British powerhouse, Cable & Wireless, became the first U.K. telecom operator with an international license to provide services from the United States to the United Kingdom. The company didn't lose any time - the Cable & Wireless U.S. subsidiary, based in Vienna, Va., just won the license in December from the Federal Communications Commission.

International telcos will save money and time by doing more themselves. "Improved control over our network and reduced dependence on third parties will also mean that we shall be able to offer our customers higher-quality service," said Cable & Wireless chief executive Richard Brown in a release.

Sallet said while he's excited to be part of an international marriage, he's disappointed with foot-dragging by U.S. bureaucrats. Although the Telecommunications Act of 1996 was signed into law almost one year ago, not much has changed. "The local exchange market remains a monopoly," said Sallet. "[The Baby Bells] have decided to merge rather than compete .... Cable companies have scaled back."

Over the past few years, MCI has invested $1 billion in getting into the local telephone market, said Sallet. The company plans to spend $700 million in 1997. By the end of the year, Sallet said, MCI hopes to be offering local service in 25 markets.

In Britain, telecom monopolies were ended in 1984, and all of the government's holdings in BT were divested by 1991. BT, which is now the fourth largest telecom company in the world, had $22 billion in revenues last year.

While Butler and Sallet would not comment specifically on the expected move into the Asian market (the company is now in a quiet period), BT officials have said the company's three principal market concentrations are North America, Western Europe and the Asia-Pacific region.

BT currently owns 33 percent of Marubeni Corp. in Japan and has alliances with Nippon Information and Communications in Japan and Samsung in South Korea.

As part of their earlier alliance, BT and MCI entered the Asian market with a systems integration deal - NTT of Japan, one of the country's largest information systems and computer networking businesses, as a distributor for ConcertInternet Plus.

The Asia-Pacific region has six of the world's 10 best country markets for telecommunications and 14 of the world's 50 best, according to a study by the planners of InterComm 97, an international telecom trade show to be held next month in Canada. In 1993, the Asian countries represented a $39.26 billion market, estimated to be growing 15 percent annually. Other rapidly growing areas include North America and Latin America.

Earlier this month, Odyssey Telecommunications International Inc., a wireless satellite company owned by TRW Inc., Cleveland, and the Canadian telco Teleglobe Inc., signed China Telecommunications Broadcast Satellite Corp. as its first service provider. Odyssey's $3.2 billion system, which will let customers call anywhere in the world from a wireless phone, is set to begin service in 2001.

The arrangement will be a boon to communications in China, which Odyssey said only has six telephones for every 100 people in a population of 1.2 billion.


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