The competition for US long-distance and data-networking giant MCI Communications Inc. grew more fevered today with the entrance of a third suitor: GTE Corp.
Stock exchange trading for both companies was halted at midday because of "pending news."
Although neither company would comment, reports on CNBC and Dow Jones suggested that GTE would make an all-cash offer worth US$25 billion in an effort to head off recent MCI stakes entrant WorldCom Inc. and once-assumed winner British Telecommunications PLC.
WorldCom's offer is valued at a bit more than $30 billion, but is payable entirely in WorldCom stock. BT's agreed-upon purchase price was about $18 billion - a figure reduced from $24 billion after MCI reported doubled 1997 expenses from trying to start up its US local-phone business.
MCI late this summer tentatively accepted the BT offer, and the sale had been approved by regulators in Europe and the United States. Last week, the MCI board directed company officials to weigh the 1 October WorldCom offer.
In the competitive landscape emerging after implementation of the Telecommunications Act of 1996, long-distance companies are testing local waters and local telcos such as the regional Bells are trying to expand into long-distance. But other services, notably data networks and cable television, have also emerged as crucial elements in companies' efforts to offer total product and service packages.
A GTE-MCI combination would join one firm already established in local telephony across the United States with one that has a solid hold on both the consumer and business long-distance markets.
The combined telco would also be a heavyweight in network services - GTE earlier this year acquired BBN Corp., the Boston-area Internet pioneer and backbone provider, and MCI maintains one of the best-regarded networks in the business. The WorldCom-MCI deal - with the Jackson, Mississippi, WorldCom bringing its UUNET to the table - would also create a networking powerhouse.
"I think [GTE] has their hands full with BBN right now," said Dan Taylor, telecom analyst at the Aberdeen Group consulting firm in Boston. He thinks the rumored acquisition sounds like a bad idea and said the WorldCom-MCI deal sounded much more promising, from the point of view of synergy as well as less regulatory hassle.
"It remains to be seen how MCI would fit into the GTE strategy," said Taylor. "What are they buying - capabilities or market share?"
