AT&T moves in on US cable TV giant

Telecoms Acquisition puts BT in a shaky position over partnership.

AT&T has mounted a $48 billion bid for the largest US cable TVhip. operator, TCI, in a bid to capitalise on the emerging internet and telecoms technologies.

However, the deal has thrown British Telecom's attempts to find a US partner into turmoil.

The US telecoms giant will combine its consumer long-distance, wireless and internet services units with TCI's cable, telecommunications and high-speed internet businesses to create a separate subsidiary, AT&T Consumer Services.

Following the earlier failure of BT's merger with MCI, the UK telecoms giant has been looking for a potential US partner. It had been rumoured that AT&T and BT were close to forming a joint venture involving both companies' international assets.

Earlier this year, Microsoft was rumoured to be investing $1 billion in TCI, but instead the software giant settled for a scaled-down deal to embed its Windows CE operating system for consumer devices in five million TCI set-top boxes.

In a statement, BT refused to comment on whether the deal would affect its negotiations but claimed it was continuing to have discussions with a number of potential US partners.

In another telecoms development, Worldcom and MCI have struck a deal with the EC that will enable the regulatory body to approve their $27 billion merger.

A representative for the EC said last week a deal had been struck, but would not reveal details. He said the two companies had satisfied the EC on its key demand, that they eliminate overlap in their internet activities.

Taking a stronger line than US antitrust authorities, the EC's competition commissioner Karel Van Miert had insisted that MCI sell off all its internet operations to ensure no single company dominated the global internet backbone.

Analysts believe an existing deal for MCI to sell its wholesale internet operations to Cable & Wireless will go ahead, but the company's remaining internet businesses will go to the highest bidder. C&W said it was still in talks with MCI about acquiring its assets. US approval is expected to be a formality once the EC is satisfied.

The US telecoms industry has undergone a series of takeovers, brought on by rapid technological change and the deregulation set up two years ago. AT&T has already acquired Teleport and had its offer for America Online turned down.