AT&T gets license to offer telecommunications services in Britain

July 09, 1994|By Bloomberg Business News

LONDON -- AT&T Corp. received a license yesterday to provide telecommunications services in Britain, putting to rest a dispute between the British and U.S. governments over which would be the first to open its market to serious competition.

The action will pit AT&T against British Telecommunications PLC, the largest telephone company in Britain, although the extent of that competition wasn't immediately known.

Last month, the U.S. Justice Department took the first step when it approved British Telecom's plan to pay $4.3 billion for 20% of MCI Communications Corp., the No. 2 U.S. long-distance carrier.

"It's a quid pro quo -- basically it looks like a bit of the continuing dance between the U.S. and U.K.," said Jason Crisp, a telecommunications analyst at Societe Generale Strauss Turnbull Securities in London.

It wasn't immediately clear which services AT&T will be able to offer in the $23 billion-a-year British telecommunications market. The company applied for a license more than a year ago to provide private line and domestic voice and data services as well as international resales of its capacity to third-party carriers.

Before AT&T can begin offering services in Britain, it has to wait 28 days for a public comment period. After that, AT&T will be told specifically what services it can provide. A company spokesman said AT&T has yet to see details of the license.

To date, AT&T, the largest provider of U.S. long-distance services, has been allowed to provide only a few services in the United Kingdom.

The U.K. Department of Trade and Industry also cleared the way yesterday for Concert, the $1 billion joint venture between British Telecom and MCI, to proceed in Britain.

AT&T will face a formidable rival in British Telecom, which still has about 90% of the British market. AT&T wasn't daunted.

"This is a positive step forward for AT&T in the U.K. and an important day for competition," AT&T said in a statement. "We recognize we have more challenges ahead as we await the U.K. lifting of the restrictions on fully facilities-based competition."

The British market is expected to rise 23 percent, to $28.3 billion, in 1997 from $23 billion at the end of 1993, according to market researcher Dataquest.

Analysts said the license portends the further crumbling of competitive barriers in Europe.

"This just accelerates AT&T's entry into the U.K.," said Blake Bath, an analyst at Sanford Bernstein. "It's thematic of what is likely to take place throughout Europe over the next several years -- the acceleration and erosion of entry barriers to foreign carriers."

Analysts expect more governments to grant licenses to foreign carriers, specifically in France and Germany. Last month Sprint Corp., the No. 3 provider of U.S. long-distance services, said France Telecom and Deutsche Telekom would pay $4.2 billion for a 20 percent stake in Sprint.

"The principal carriers of key nations looking for new revenue growth will look outside their native borders," said Ken McGee, analyst at Stamford, Conn.-based Gartner Group. "I would expect to see much more of the permission of foreign carriers to provide services outside their borders over the next five years."

"[AT&T's approval] is not as attractive as British telecom's approval to buy 20 percent of MCI in the U.S.," Mr. McGee said. "British Telecom . . . has an entry in the larger U.S. market."

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