Telecom giants risk fines after racing ahead with joint services

Date: 26/11/1998

By Peter Chapman

TELECOMS operators British Telecom and AT&T could face European Commission fines for going ahead with plans for the American company to sell its British partner's services in the US before their 9-billion-ecu joint venture has won regulatory approval.

Under the deal announced last week, AT&T is to begin selling services under the brand name AT&T Concert Services which will allow corporations to transmit voice and data traffic from AT&T's vast US network through BT's global network in more than 50 countries.

AT&T said the move would allow the two companies to reap many of the benefits of the joint venture while they await regulatory approval for their broader alliance.

There was speculation after the announcement that the Commission would not act on complaints from several rivals, including the UK's Cable and Wireless, which argued that the two should not be allowed to jump the gun before regulators on both sides of the Atlantic had cleared their giant alliance.

This speculation was based on the fact that the Commission waved through a similar deal in 1994 when it allowed MCI to market Concert. But a spokesman for Competition Commissioner Karel van Miert said this week that officials would still probe the BT/AT&T marketing pact to see if it breached EU competition rules.

“I don't know if there is a problem, but we are looking into the matter. We have received complaints, although I cannot confirm who made them,” he said.

The spokesman said the situation was different to the Commission's 1994 decision that BT's deal with MCI did not even fall under the scope of the Union's anti-trust rules governing restrictive trade agreements.

“At that time we did not have a merger. There was just a loose alliance,” he said, adding that BT and AT&T were now embarking on a fully fledged global tie-up of their international businesses.

“If there is some kind of infringement, we could take sanctions. We could impose fines,” he added, warning that the companies involved could face penalties for jumping the gun even if their deal was finally approved by the Commission.

Korean electronics giant Samsung was fined 33,000 ecu in February this year for failing to notify the Commission of its joint venture with US technology firm AST Research, and for starting the venture before winning regulatory clearance.

The Commission said the fines were lenient only because the two parties involved had cooperated fully with its investigations once their omission had been pointed out.

The new investigation comes as Van Miert prepares to formally announce next Friday (4 December) that he intends to launch a full-scale probe into the transatlantic telecoms pact. Under their broader alliance, BT and AT&T plan to pool all their international telephone networks in a new venture which will be 50-50 owned by each company. This would combine all their foreign call traffic and their products for business customers.

Privately, staff from both of the operators expected the Commission to launch an in-depth probe into the venture, mainly on account of its sheer size. A number of rivals have attacked the deal, claiming that the duo would control too large a share of the transatlantic cables which join telecoms networks in Europe and the US.

Van Miert's spokesman said the Commission was also expected to rule next week on whether to approve another AT&T deal - its 40-billion-ecu acquisition of US cable television giant Telecommunications Inc (TCI). This deal would make it possible for AT&T to offer local telecoms and Internet services to 17 million American households.

The US telecoms firm has already announced plans to spend 818 million ecu on updating the network to deliver telecoms and high-speed Internet services over it. But the deal has come under attack in the US because AT&T plans to bundle together its new network with the services of the AtHome high-speed Internet service provider, which is controlled by TCI.

Competitors claim this would prevent them from offering rival on-line services on the state-of-the-art networks which AT&T and TCI will create. AtHome, which has launched a deal in the Netherlands to offer services over the cable networks of Edon Beheer BV and Palet Kabelcom BV, has holdings in several EU cable and media companies including shares in Flextech and Telewest and Ireland's Princess, and has a joint programming venture with Canal Plus in France.

But TCI officials expect anti-trust concern to centre on the US and do not expect Van Miert to intervene over the AT&T deal. “Frankly we don't expect any major hurdles,” said spokeswoman Lila Cocoros.