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C&W taps global telecom market

The British firm's buyout of MCI's Net backbone marks one of its biggest forays yet into the U.S. market, a key outpost in the telecom war.

Cable & Wireless's buyout of MCI Communications' Internet backbone business marks one of its biggest forays yet into the U.S. market, a key outpost in the global telecommunications war.

The telecommunications giant, which traces its roots back to the heyday of the British empire, is trying to recreate that clout and reach. The consolidation of the telecom industry in general is being brought on by deregulation and the merging of voice and data systems. But in this case, the seller--MCI--also is under pressure from antitrust regulators, who have expressed concern about the company becoming too powerful. (See related story)

Competition for the English company is intense, however, from the likes of British Telecom, MCI-WorldCom, AT&T, Baby Bells such as SBC Communications, and others.

Cable & Wireless's push into the United States has been under way for some time. According to sources, the telco has considered buying a Baby Bell, and also has toyed with the idea of joining forces with a high-speed Internet access provider like @Home. No such deal has been consummated, however.

The telco is buying a network built by a Net pioneer. Under the terms of the deal, C&W will get all of MCI's 22 domestic nodes, 15,000 interconnection ports, more than 40 ongoing peering agreements, and equipment dedicated to supporting the system. The company also will acquire MCI's contracts with its Internet service provider customers--totaling more than 1,300 U.S. and international ISP customers in 76 countries. MCI's residential and non-ISP commercial customers are not affected by the deal.

Cable & Wireless has undergone other major transitions. In 1979, for example, the telco was targeted as a candidate for privatization, a process that was completed in November 1981.

The company now has operations in more than 50 countries on five continents. They are centered around hubs in Asia, the Caribbean, North America, and Europe. C&W, which employs about 37,000 people worldwide, was a pioneer in mobile communications, having built and operated the world's first cellular network in Qatar in 1978.

"We have achieved double-digit growth in both revenue and profit, despite major strategic investments and adverse economic conditions in Asia," C&W chief executive Richard Brown said in the telco's latest annual report. "Our growth rate in revenue compares to just 7 percent two years ago."

Analysts warn, however, that the intense competition in the telecom sector will only steepen going forward. Like Cable & Wireless, other telcos vying for market share in the communications space also are expanding rapidly through acquisitions.

Business reporter Suzanne Galante contributed to this report.