Bernard Ebbers WorldCom’s chief executive who will lead the $60bn new company MCI

Bernard Ebbers, WorldCom’s chief executive who will lead the $60bn new company, MCI WorldCom, said he could justify the cash payout to BT through $5bn of extra synergies.The deal gives BT a pre-tax gain of $2.25bn on its original investment in MCI. Sir Peter Bonfield, BT’s chief executive said: “I think you could say that we have used our rights pretty well.” He said the joint venture with MCI on Concert, the telecoms services company 75 per cent-owned by BT, would continue. Mr Boutros- Ghali, the Egyptian statesman deposed as United Nations secretary-general last year, has the support of France, Belgium and Quebec, the three largest players He is a high-profile name. Just as usefully, his election will get up the nose of the United States, which fought to have him removed from the UN.In an interview with the French magazine Le Point, Mr Boutros-Ghali said Francophonie had “no future” if it stuck to its original conception: the defence of French as a global language;”It must turn to defending cultural diversity and multi-lingualism, which constitute the true quality of the human heritage.”Mr Moreau-Defarges says this point is accepted by Paris, even if it is, in a sense, an admission of defeat: “Any hope that you could build an international organisation around French alone cannot be sustained in the modern world.”. In addition, BT receives a $465m break- up fee negotiated as part of its original merger agreement with MCI, the US’s third-largest long-distance telecoms carrier.
WorldCom’s bid tops a competing $28bn cash offer from GTE, the local US telecoms giant GTE said yesterday it was “considering” WorldCom’s offer.

All these plans are essentially protective and defensive in nature. If these companies were serving their customers properly with state of the art low-cost banking and insurance products, grand strategies like these, dreamt up in the City for the benefit of the City, wouldn’t even be getting on to the chief executive’s desk, let alone be coming close to execution. The fact that they are serves only the underline the failings of these ancient behemoths.. The three-way struggle to buy MCI finally looked at an end yesterday after WorldCom removed a key obstacle to a deal by paying British Telecom $7bn in cash for its stake in MCI. But the takeover of MCI by WorldCom leaves BT in serious need of a partner to fulfil its aim to be a global telecoms force Sameena Ahmad reports.

WorldCom’s cash offer for BT’s 20 per cent stake in MCI raises its original $30bn all-paper offer for MCI by over a fifth to $37bn, the largest bid in corporate history. For every one customer it cannibalises from its existing customer base, it gains 50 others from rival banks.The big clearers are highly vulnerable to these new forms of banking and are naturally, given the constraints of their existing cost bases and market shares, worried sick by them. It is against this backdrop that the pressure for mergers, both within the banking and insurance sectors and between these sectors, ought to be seen. It was also the first to introduce a fully fledged Internet bank and has forged some very promising bankinglinks with Tesco and Virgin Direct.In part, Royal Bank is able to do this because it is comparatively small, with just 2 per cent of the UK banking market. For larger banks to go wholeheartedly into these new forms of low-cost banking would mean cannibalising their existing markets on a scale that would do irreparable damage to margins and profits For Royal it is not the same. It was one of the first to introduce telephone banking and now has more of its customer base using this service than any other bank.

Would such a union make sense? A case can certainly be made for it. There would be little scope for cost cutting, unlike any consolidating merger within these separate industries, but there are obvious advantages to be had from funnelling the insurance company’s products through the bank’s customer base.Moreover, as the borders between traditional forms of retail lending, account holding and other forms of saving become more and more blurred, there is obviously something to be said for the one-stop shop, the company that can offer all these services.But do high street banks need to merge with insurance companies to create that opportunity? Royal Bank of Scotland has developed a highly successful relationship with Scottish Widows which delivers benefit to both companies, probably on a par with anything that could be derived from a full-scale merger, but without having to go through that process.It is no accident that Royal Bank of Scotland is considerably more innovative in the banking market than most of its English peers, despite its comparatively small size. It is therefore entirely possible that Barclays is thinking in the same terms – a takeover of L&G, or possibly Norwich Union, with which it already has links. So did it happen? Did Barclays approach him? Probably not, seems to be the answer, though it is easy to see why the stock market might think it true The idea is eminently plausible. Having decided to throw in the towel on investment banking, Barclays is under pressure to come up with an alternative strategy for taking the company forward.