Has Telecom talked to MCI too?

Telecom's exploration of partnership options has included high-level talks with MCI WorldCom, according to an industry source.

Telecom's exploration of partnership options has included high-level talks with MCI WorldCom, according to an industry source.

After being approached for comment on potential links with the US-based carrier yesterday, a Telecom spokesman reaffirmed the company's policy that "we don't comment on market speculation in any form."

In the past few days The Australian newspaper has reported that Telecom CEO Theresa Gattung has been talking to NTT DoCoMo, the mobile arm of the giant Japanese telco NTT, which has in turn been in discussions with C&W Optus, owner of Australia's second-largest mobile phone operator.

The Australian quoted C&W Optus chief financial officer Norman Gillespie privately telling key industry players that "everything was on the table" in terms of a company restructure. The paper speculated that a new Asia-Pacific mobile phone "juggernaut" involving all three parties might be in the works.

But an alliance with NTT may not be the only option on the table for Telecom or Optus. Telecom has apparently also discussed options with MCI WorldCom, which has had only a modest presence in New Zealand since it sold its 25% stake in Clear Communication to British Telecom last year. The source says a downward movement in Telecom's share price below $7 could trigger action.

An investment in Telecom by MCI WorldCom would run into the same Kiwi Share rules as one by NTT - requiring government approval for a stake of more than 10%.

But Ord Minnett telecommunications analyst David Wallace says he doubts the value for MCI WorldCom of taking a financial stake in Telecom: "MCI have been here before - why would they want to come back? I'd be quite comfortable with the idea of an alliance - perhaps offering some sort of technology sharing and improved termination costs."

MCI WorldCom, Optus and Telecom already have an important partnership in the Southern Cross cable. MCI WorldCom has invested $US100 million in a 10% in Southern Cross, as part of a region-wide programme of infrastructure building which includes a role as lead partner in a Japan-US cable project set to come online this year. The company has promised an eventual 1.2 terabit/s of trans-Pacific bandwidth - or about 200 times that currently available - comparing the vision to its extensive trans-Atlantic cabling.

In Australia, MCI WorldCom has also built fibreoptic loops in Melbourne and Sydney. The company was granted a full telecommunications carrier license in Australia in march. Its major presence here is via its Internet subsidiary UUNET, which provides infrastructure to fellow MCI-owned companies Voyager and CompuServe.

Although it has a presence in 65 countries, MCI WorldCom's assets are overwhelming in fixed, rather than mobile infrastructure. The company has repeatedly promised in the past 18 months to expand its commitment throughout the region as regulation allows.

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