World Telecommunication Day 1998

May 4, 1998

Competitive Pressures Feed Global Ambitions

Cross-border investments and partnerships are multiplying as new entrants take on the leaders in established markets.

The liberalization of telecoms markets has placed increased pressure on operators in the United States, Europe and Japan to expand abroad. Companies that are leading players in the world's most established markets, such as BT and Cable & Wireless (C&W) of the United Kingdom, Telefónica de España and Japan's NTT are forging new cross-border alliances to increase their competitiveness and to preserve their revenues against the threat of new entrants in their own home markets.

BT's strategy is ''to compete in the major world markets of Western Europe, the United States and Asia-Pacific,'' says Alfred Mockett, president and CEO of its international arm, BT Global. Joint ventures are being formed in Europe and the United States, where BT's Concert Communications Services are widely used by multinational corporations. ''We have applied for a Type 1 license in Japan, which will enable us to build and operate our own infrastructure.''

C&W's Virginia-based U.S. subsidiary, Cable and Wireless Inc. (CWI), offers domestic and international voice, data, messaging and Internet services to U.S. business customers. Its Global Intelligent Virtual Network enables small and medium-sized businesses, as well as multinationals, to link their sites around the world without the fixed costs and management complexity involved in setting up their own private networks.

Under a joint marketing arrangement agreed last October with Ameritel, a subsidiary of USCI Inc., CWI is offering its customers wireless products such as cellular services and paging. The agreement will enable CWI ''to offer our customers cellular and paging services with USCI's central billing and uniform rate platform,'' says CEO Rich Yalen.

The Australian carrier Telstra Corp. is looking to attract business from European multinational companies that are active in the Asia-Pacific region. It announced a deal with Infonet Services Corp. in March through which Telstra would offer advanced Internet, intranet and other global data-communications services to European-based multinationals via Infonet's network. Infonet's global network is accessible from more than 180 countries, with local support in 57 countries and infrastructure in 39 countries.

Telefónica announced in March that it was forming a partnership with two big U.S. service providers that are in the process of merging - WorldCom and MCI - to enter new telecommunications markets in Europe and the Americas. This follows the agreement that Telefónica reached with MCI a year ago to set up joint ventures in Latin America.

''We have chosen the best partners to help broaden our reach in Europe, consolidate our market leadership in the Spanish-speaking world and move forward with new investment opportunities in Latin America, particularly in Brazil, which will be our principle focus during 1998,'' says Telefónica Chairman and CEO Juan Villalonga.

''The partnering of WorldCom, Telefónica and MCI represents a new era of communications competition in both Europe and the Americas,'' says Bert Roberts, Jr., chairman of MCI. ''The two regions account for 70 percent of the global telecommunications market and are increasingly open for competition,'' he adds. ''Together, we will utilize existing facilities and build new networks in emerging markets to support the explosive growth of communications services around the world.''

Telefónica Internacional already holds substantial shareholdings in telecommunications companies in Argentina, Chile, Peru, Venezuela, Puerto Rico and Romania. The parent company this month launched a global rights issue aimed at raising funds to finance the expansion plans.

Other U.S. companies are also moving into Europe, despite the reported problems that AT&T has encountered in forming alliances with partners such as Telecom Italia. Qwest Communications announced this month that it was buying EUnet, Europe's first and largest commercial Internet service provider. The move will give Qwest access to a profitable corporate-customer base.

Japan's NTT has responded to the prospect of liberalization in its home market by expanding into the United States. This month it announced it was buying a $100 million stake in Verio, a Colorado-based Internet service provider. The investment could give the Japanese giant as much as a 12.5 percent share of Verio when it goes public later this year.

Earlier this year, another Japanese company, DDI Corp., signed a memorandum of understanding with the Canadian carrier, Teleglobe, to set up joint domestic and international services beginning next October. The agreement gives Teleglobe access to DDI's 15 million customers for long-distance services and places it in line to become a Type 1 carrier in Japan.

Pamela Ann Smith