EU clears BT, AT&T merger

The European Union's legislative branch, the European Commission, has approved a pending joint venture between British Telecommunications PLC and AT&T on the condition that AT&T sells off its own long-distance carrier in the UK, among other concessions.

BT and AT&T said last July that they would form a joint venture worth $US10 billion in revenues by 2000 and to offer global telecommunications services to multinational companies.

In December, the Commission launched a full-scale investigation into the proposed venture, fearing BT's and AT&T's combined forces would give the venture an overly-dominant market position in several areas including UK international voice services, telecommunication services on the UK-to-US route and global communications services, the Commission said.

The Commission approved the deal on Tuesday -- which is still subject to approval by the US authorities -- but only after getting BT and AT&T to agree to several conditions. Most importantly, AT&T will divest itself of ACC Long Distance UK, a wholly-owned subsidiary of ACC, a switch-based provider of long- distance telecommunications with headquarters in the US.

In addition, AT&T must create a "greater structural separation" between itself and Telewest Communications, the UK's second largest cable operator in which AT&T has a 22 per cent stake through its acquisition of Tele-Communications Inc (TCI). Furthermore, AT&T must let another distributor aside from itself distribute services in the UK from its joint venture with Unisource NV, AT&T-Unisource Communication Services, the Commission said.

In response to queries about how the structural separation would take place, an AT&T spokesman said that "we do not envisage any change in our relationship with Telewest", of which AT&T owns 22 per cent by way of its acquisition of TeleCommunications, Inc.

"It may possibly mean that we cannot appoint a director to Telewest's board," the spokesman added regarding the conditions placed on the merger with BT by the Commission.

On a global scale, the BT-AT&T venture will hold 30 per cent to 50 per cent of the total telecommunications services market, which doesn't constitute an overly-dominant position, the Commission said. On the UK-to-US route, the parties represent about half the traffic flowing in either direction, but less than 20 per cent of the capacity -- again, a satisfactory balance, the Commission said.

Under the terms of the venture, the parent companies also will transfer the bulk of their international telecommunications networks and traffic and other assets such as submarine cable ownership and cable landing stations, according to the Commission statement. The assets include BT's existing activities in Concert.

The joint venture will initially target large multinational companies in the financial services, petroleum and information technology sectors. The two companies also plan to develop an intelligent managed Internet protocol-based global network.

When AT&T announced it would join with BT, several questions hung in the air regarding both companies' international strategies. BT's Concert Communication Services subsidiary already delivers communications services to multinational companies, but BT now said it will fold Concert into the AT&T-BT joint venture.

Meanwhile, as previously announced, AT&T has confirmed that it will leave the AT&T-Unisource alliance, as well as World Partners -- which includes Japanese carrier Kokusai Denshin Denwa, Singapore Telecommunications Ltd., Telstra and Unisource. Also as expected, AT&T will divest itself of its 7.47 per cent stake in German telecommunications company Mannesman Arcor.

(Elizabeth de Bony in Brussels contributed to this report.)