Merger set to create global colossus
THE bidding war for US telephone operator MCI might have come to an end when its shareholders accepted a $37-billion offer by US telecomms upstart WorldCom, but the fallout will continue for many months with ripples already being felt in SA.
WorldCom's revived bid - the largest in global corporate history - has raised the prospect of a new giant in the global telecommunciations industry with a market capitalisation of $60-billion and revenues of $32-billion.
WorldCom owns UUNet Technologies, the world's largest provider of Internet services. In turn, UUNet owns 24% of JSE-listed Datatec subsidiary UUNet Internet Africa.
"The merger will create one of the world's largest carriers of international telecomms traffic. It will also become the globe's largest Internet service provider with 500 000 dial-up ports," says Andrew Smith, Datatec's group executive, marketing and strategy.
WorldCom started life as the unimaginatively named Long Distance Discount Service, reselling AT&T phone services to the corporate market. Since then its acquisitive management, expert in stock swaps, has grown the company into the world's fourth-largest telecomms operation with a strong Internet competency.
MCI is the US's second largest phone company after AT&T. Its street-smart ability to deal with incumbent competitors is renowned, and it has had considerable success in releasing AT&T's stranglehold on the US long-distance phone market.
MCI's next target is the local US phone services sector, currently dominated by erstwhile bidder GTE Corporation and the baby Bells, one of which is Telkom's strategic equity partner - SBC Communications.
"The merger reflects the new imperatives that will drive the telecommunications sector forward. In an increasingly wired world, multimedia networks that can seamlessly offer voice, video and data are fast becoming the norm that users demand," says Smith.
Smith believes the world trend vindicates Datatec's strategy of global equity partnerships and alliances.
"Besides its direct ties with WorldCom/MCI through UUNet, Datatec has also entered into an alliance with Global One throughout Africa following the acquisition of Global One SA," he says.
Datatec recently acquired a US licence that allows it to operate and provide long distance international telecommunication services from the US. Smith expects the link with Worldcom to roll out these data communication services in a more competitive manner.
This week Datatec also acquired UK-based systems integrator Bluepoint for £18million. Smith said Bluepoint will be merged with Logical, Datatec's most recent British acquisition, to form a systems integration and networking business with annual revenue of £100-million.