AT&T;, MCI Talking About Sharing Costs of Networks, Sources Say

Long-distance telephone rivals AT&T; Corp. and MCI Communications Corp. are talking about sharing the costs of providing local telephone service, sources close to the companies said Monday.

Word of the negotiations comes just days after President Clinton signed a telecommunications reform bill that frees long-distance and local telephone companies to compete in each other’s markets.

“AT&T; has been in negotiations with MCI Metro for months now,” said a source who did not want to be named.

Executives at AT&T; and MCI, speaking on condition of anonymity, told the Wall Street Journal in a report published Monday that the companies expect to reach an agreement to share in the cost of building local phone networks in some U.S. markets or swap the use of facilities they already own to bypass the networks of regional Bells and other local carriers.

The MCI Metro unit is spending $2 billion to build local circuits to reach customers in 24 cities. To lease capacity to AT&T; would help MCI get returns sooner on its investment.

So far AT&T; has no facilities to reach local customers directly, but it is willing to pay others who do. The Basking Ridge, N.J.-based giant also owns switches and other equipment that could be part of a venture, another source said.

Washington-based MCI has been a fierce competitor of AT&T; in the long-distance business, becoming its chief rival in the United States, and such talks would mark a change in relations between the two. However, sources said cooperation at the network level would not hinder competition in brands and marketing.

Neither company would comment--at least not specifically.

The negotiations first reported in the Journal were confirmed by MCI spokesman Robert Stewart, who told Associated Press that the story is “essentially correct.”

George Dellinger, an analyst with HSBC Washington, said AT&T; and MCI together have about 80% of the long-distance market but less than 1% of the local market.

“I really think the battle is not between AT&T; and MCI. It is AT&T; and MCI against the 300 or so smaller long-distance competitors who will be joined by the seven Bell companies,” he said.

Also on Monday, Ameritech Corp. launched its long-distance cellular service, which will be available to its 2 million cellular customers. The Chicago-based Bell said the service will be available in Illinois, Indiana, Wisconsin and Michigan, with service in Ohio and Missouri to follow.

The alliance between AT&T; and MCI would not be their first. Both lobbied for passage of the telecommunications bill and both are participants in the transoceanic cable networks, which are owned by many communications partners in the United States and elsewhere. In addition, MCI recently signed an agreement with AT&T; Wireless Service to resell capacity from AT&T;’s vast wireless system.

Word of the talks was well-received on Wall Street. AT&T; stock rose $1 to close at $67.50 on the New York Stock Exchange, and MCI was up $1.625 at $30.50 on Nasdaq.

* AHEAD OF SCHEDULE: FCC chief vows to implement new telecom law quickly. D3