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. Last Updated: 07/27/2016

British, U.S. Telecom Titans to Merge

LONDON -- British Telecommunications has said it will buy MCI Communications Corp. in a deal worth more than $20 billion, creating a global telephone goliath to rival AT&T.


BT will give MCI shareholders a combination of cash and shares in the merger announced Sunday that will form a new, British-based company called Concert. The two telephone companies will continue to use their brand names on their home turfs in the United States and Britain.


"This merger creates the premier telecommunications company of the new millenium," said Bert Roberts, chairman and chief executive of MCI. Concert will combine the cash resources and global positioning of BT with the marketing skills of MCI.


The companies promised a "communications powerhouse," with annual revenues of ?25 billion ($41 billion), annual cash flow from operations of about ?7.5 billion and 43 million business and residential customers in 70 countries.


The new group will be run by executives from both companies.


Sir Iain Vallance, the BT chairman, and Roberts of MCI will serve as co-chairmen. Sir Peter Bonfield, BT's chief executive, will assume that role with Concert.


The companies hope to complete their merger by August, but first must secure approval from regulators in the United States, Britain and Europe, as well as approval from shareholders.


BT already owns 20 percent of MCI and will give the other stockholders new stock in Concert as well as $6 for each MCI share they hold. BT's cash payment will be about ?2.3 billion, but a spokeswoman said the overall value of the deal comes to more than $20 billion.


"We believe this merger will provide major benefits for the shareholders, customers and employees of both BT and MCI," Vallance said in a statement.


Concert will provide a powerful competitor to AT&T, the world's largest long-distance phone company. It would have combined revenue of $35 billion and two strong brand names with operations in more than 70 countries.


"You really only have had one internationally recognized global player and that's been AT&T, not that they're the largest but that they carry the best brand recognition," said Gary Miller, president of Aragon Consulting Group, which specializes in telecommunications and technology. "Now you have another global gorilla."


MCI, America's No. 2 long-distance company, would continue to operate under its name and keep a headquarters in Washington. BT, based in London, will continue to use the BT brand name in Britain.


The two phone companies have been in discussions of one sort or another ever since 1993, when British Telecom bought a 20 percent stake in MCI.


The British Telecom purchase is for the remaining 80 percent of MCI's shares.


If regulators approve the merger, it would be the biggest foreign takeover of a U.S. company by far and mark the end of independence for MCI, a storied business in its own right that in some ways is responsible for the competition that's transformed the U.S. telecommunications industry.








It was the persistence of MCI more than 12 years ago that forced the breakup of the AT&T Ma Bell monopoly.


An MCI-British Telecommunications marriage also would radically reorder the landscape of phone service providers in the months since the U.S. Congress enacted a sweeping deregulation that allows long-distance companies to compete with local phone companies and vice versa.