InformationWeek

October 20, 1997

MCI Mulls GTE, Rival Offers

Customers wait for dust to settle

he nation's No. 2 long-distance carrier is its No. 1 takeover target. MCI received yet another acquisition bid last week-this time from GTE Corp., which put up a $28 billion cash counteroffer to WorldCom's $30 billion stock bid. BT's earlier $18 billion cash-and-stock deal may be a historical footnote.

While BT offered MCI a global footprint and WorldCom played up its Internet and entrepreneurial compatibility with MCI, GTE stressed its dominance of local telecom markets nationwide. That business, mostly in second-tier markets in 29 states, complements MCI's local-network buildup in 40 first-tier mar kets. GTE, meanwhile, plans to extend its infrastructure by buying fiber-optic networks from Qwest Communications.

BT has no presence in the U.S. local telecom market; WorldCom and MCI overlap in 34 of 86 local markets, says the Yankee Group, a consulting firm in Boston. "GTE makes more sense for MCI because they are hungry to get into the local business," says Bill Schwarz, director of telecom for Oxford Health Plans, an MCI customer in Norwalk, Conn.

A combined GTE-MCI would generate more than $40 billion in annual revenue, serving more than 21 million local and 24 million long-distance customers. GTE recently entered the long-distance market on its own, securing 1.5 million customers in all 50 states, and completed its purchase of Internet service provider BBN Corp. last month. But GTE has little international coverage outside of scattered national interests.

Some customers are leery of this serial bidding. One area of concern is Concert, MCI's global networking joint venture with BT. "We have live business with [Concert]," says Bard Haerland, VP of worldwide telecommunications with Unisys Corp. "I can't help but feel if cool heads prevail, there will be an opportunity for BT to be a piece of any new company."

Hotel operator Hyatt International Corp. is waiting for a deal to shake out before issuing a request for proposals for its global voice business, says John Prusnick, manager of IS. "At this point," he adds, "I wouldn't know who to send it to."

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