BT to Buy MCI in Biggest Deal of Its Kind

British Telecommunications on Sunday announced its agreement to buy MCI Communications Inc. in the largest-ever foreign takeover of an American firm, a $24.7-billion transaction that the two partners promised would reward telephone users worldwide with better service and lower prices.

The takeover, if approved by regulators, would create a new company named Concert with headquarters in London and Washington, D.C., although MCI and BT would continue to operate in their home countries under their current names.

The combination would create a behemoth with a combined work force of 183,000, serving 43 million customers in 72 countries and earning profit of $4.7 billion on revenue of $42 billion.

“Every country has its own telecommunications company--now the planet has one too,” Bert C. Roberts, MCI chairman and chief executive, said at a news conference Sunday in New York.

Concert would be a formidable rival to AT&T; and other international carriers. Indeed, AT&T; Chairman Robert E. Allen said in a statement Sunday that he hopes the deal would get “the scrutiny it deserves” from U.S., British and European regulators. Allen complained that BT controls more than 90% of all local telephone connections in Britain and said approval of the MCI takeover should be conditioned on “the complete and unqualified opening of the telecom market in the United Kingdom.”

Roberts and Sir Iain Vallance, chairman of BT, said during their news conference that the British market is the most open in the world. They said they hoped, rather, that they would succeed in opening the United States’ $100-billion-a-year local-calling market to greater competition.

Analysts said BT’s financial muscle would aid MCI’s efforts to penetrate the lucrative local phone-service market in the United States, but the deal is really about establishing a global platform.

MCI shareholders would receive 0.54 share of BT stock plus $6 in cash for each of their shares, which places a value of $35.97 on MCI shares--up 43% from their $25.125 closing price Thursday, the day before news of the merger talks began leaking out. MCI shareholders would end up owning one-third of Concert and BT the remaining two-thirds.

Roberts said he expects regulatory approval “sometime within the next year.” Although the issues are complex, he said, BT’s original 20% investment in MCI in 1993 got such extensive scrutiny that the regulators already have “a leg up.”

After the merger, Vallance and Roberts would become co-chairmen, but the chief executive would be BT’s current CEO, Sir Peter Bonfield. Gerald H. Taylor of MCI would be president and chief operating officer of Concert. BT would have eight representatives on the board and MCI seven.

MCI’s somewhat thorny alliance with News Corp. would probably be reduced shortly, although not directly as a result of the BT deal, MCI executives say. Roberts said he expects a change in MCI’s 50-50 partnership with News Corp. in developing the satellite TV service American Sky Broadcasting, with MCI’s share dropping to about 20%.

* GLOBAL REACH: British Telecom seeks to become a “supercarrier.” D2