AT&T, BT in alliance talks

By David Rohde
Network World Fusion, 6/22/98

AT&T and British Telecommunications plc are negotiating a possible international alliance, according to sources close to both companies.

If the talks succeed, the two telecom giants are planning an announcement sometime after the European Commission rules on the pending merger between WorldCom, Inc. and MCI Communications Corp. The AT&T-BT alliance may be strictly a co-marketing deal, but AT&T officials are believed to prefer an actual joining of their international networks.

"There are definitely such discussions going on," said Berge Ayvazian, senior vice president of The Yankee Group consulting firm in Boston. Top AT&T officials-including Frank Ianna, executive vice president of network and computing services-have been in Europe recently assessing AT&T's ability to use its current alliances to offer global services.

An AT&T-BT alliance would shake up the international telecom scene, particularly for users holding contracts with one of the major global carriers. Until now, MCI has been BT's partner in the Concert joint venture for corporate voice and data services.

Currently, AT&T sells European services via AT&T-Unisource, a consortium of five carriers that does not include a British partner. It sells services elsewhere via WorldPartners Co., a loose association of mostly monopoly national carriers.

Both AT&T-Unisource and WorldPartners have had some market success. But they have also suffered criticism because they do not truly offer a unified global network architecture, relying largely on traditional international half-circuits and network-to-network interconnections for voice virtual private networks, frame relay and call center free-phone (800-like) services.

In January, AT&T Chairman and CEO C. Michael Armstrong publicly stated he was dissatisfied with the carrier's global strategy and might be looking for a way to build a more seamless global network.

In an exceptionally delicate mating ritual, AT&T and BT must wait to see if the WorldCom/MCI merger is approved in Europe for two reasons, according to political analysts.

First, BT is selling WorldCom its 20% stake in MCI. It has to depend on the WorldCom deal going through to make sure it gets its money.

Second, the AT&T-BT venture would require its own EC approval, and the Europeans have consistently expressed concern about U.S. dominance of global telecom structures, including the Internet backbone. The WorldCom-MCI merger approval would give the new partners some cover for their own deal.

Even then, neither an AT&T-BT alliance nor its approval is certain.

"Looking at the difficulty the European Union is giving BT and MCI, I think AT&T and British Telecom are appropriately reluctant to make any public statements," Ayvazian said. "Clearly the European Union would be as concerned about the dominant position AT&T and BT would have in the North Atlantic market for telecom services."

The EC is still pressing WorldCom and MCI to give up more assets beyond the already-announced sale of MCI's wholesale internetMCI customers and network. The EC is expected to give its final ruling by July 15.