Despite the ban on it delivering broadcast entertainment to UK homes before the year 2000, British Telecommunications Plc has every intention of playing a full part in the UK operations of the ventures that emerge as a result of MCI Communications Corp’s proposed $2,000m investment for a 13% stake in Rupert Murdoch’s News Corp Ltd. The company says that it will offer whatever services emerge from the alliance in the form of video on demand, the definition of which will no doubt be stretched to near breaking point. The company is also adamant that with all the infrastructure it has in place, it wants end-to-end control of any future services and is not interested in handing off services to a third party for the last mile. MCI and News announced their alliance on Wednesday evening, saying that they intend to create and distribute electronic information, education and entertainment services to businesses and consumers worldwide. A worldwide equally-owned joint venture company will be formed, in which each will initially invest $400m – MCI in cash, News likely in cash and assets such as such as parts of its Fox empire in the US and the BSkyB satellite television venture in the UK. MCI will invest up to $2,000m over four years for the 13% stake in News Corp, which could rise to 20% at the end of the period, to become the largest outside shareholder; it will start by buying $1,000m of preferred stock and warrants at closing, expected in a few months. Murdoch reckons that the alliance represents the first time all the building blocks – programming, network intelligence, distribution and merchandising – to offer new media services on a global scale have been put in place. Together, we can produce television, movies and publications; provide broadband network and direct broadcast capabilities virtually anywhere; and leverage effective sales forces and brand names known around the world, said MCI chairman Bert Roberts. News Corp assets include Fox Broadcasting Co, Twentieth Century Fox, the New York Post, BSkyB, the pan-Asian Star TV satellite television system, HarperCollins Publishers and over 130 newspapers, with leading market shares in the UK and Australia. Murdoch’s vision is that subscribers should be able to access internetMCI and Delphi Internet shopping and on-line information over the same service that brings video entertainment. The news was greeted by a surge in the News share price, up $1.875 at $22.375 as soon as it was announced, and an 87.5 cent dip in MCI’s price to $21.375; News closed at $23, MCI at $20.5625. British Telecom’s 20% of MCI means that it will end up with an indirect 2.6% holding in the Sun, Bart Simpson and all News Corp’s other assets. The proposed joint venture company will be headquartered in New York or Washington, and the first markets it will serve will be the US and Europe. Last week the Federal Communications Commission said it would waive limits on foreign ownership of US broadcasting licences if Murdoch and his media empire can show that their 1985 purchase of television stations served the public interest, and the deal is seen as a big step towards demonstrating that. Moody’s Investors Service and Standard & Poor’s Corp said they might upgrade News Corp’s credit ratings after the deal. Analysts fret that MCI’s initial stake in News Corp will be in non-voting shares, and that when it does get votes, it has agreed to split them in the proportions that other shareholders vote.
