Headlines - August 13, 1999
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CHINA
EUROPE
INDIA
INTERNET/E-COMMERCE
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Nextel Receives Regulatory Approval to Acquire Nextwave Spectrum
Shares of Nextel Communications Inc. rose more than 10 percent yesterday after the company, had received Federal approval to proceed with plans to acquire Nextwave Communications Inc. Company shares rose $5.125, to $53.125. The Justice Department and the FCC agreed to let Nextel pursue plans to acquire spectrum owned by Nextwave Personal Communications Inc., which filed Chapter 11-bankruptcy protection in June 1998. The spectrum would allow Nextel to handle strong growth in customers and to add services.
ICG Communications to Sell Satellite Services Unit to ATC Teleports for $100 Million
ICG Communications Inc. reached an agreement to sell its satellite services to ATC Telecports Inc., a unit of the American Tower Corp., for approximately $100 million. The unit, which employs about 90 people, includes ICG’s Maritime Telecommunications Network, a provider of communications and other broadcast capabilities to the cruise industry, the Navy and offshore oil and gas platforms. ICG provides local telephone services to businesses.
Cablevision’s Second Quarter Net Loss Beats Expectations; Company Reaps Benefit for Demand for Communications Products
Reaping the benefit of a strong demand for its cable television, telecommunications and entertainment services, Cablevision Systems Corp. $167.8 million second quarter loss, or $1.10 a share, still beat some Wall Street expectations. During the same period in 1998, the company reported a loss of $123 million, or 82 cents a share. The company said that expenses related to investment in its cable network grew, as did one-time costs associated with Y2K computer issues and stock plan charges for employees. Operating cash flow, a key element of a cable company’s health, increased 9.2 percent on a pro-forma basis, and about 8.3 percent for the whole company, or 12 percent if $8 million in one-time Y2K costs were not included. Revenue for the second quarter increased about 18 percent to $946.3 million from $805.2 million. One thing that did hurt the company’s growth was its emphasis on rolling out new services, including a range of telecommunications services, high-speed Internet access and upgraded cable TV services.
Superior Telecom to Close 3 Plants and Cut 469 from its Workforce
Superior Telecom Inc., a major United States supplier of copper wire and cable for telecommunications, announced that its Superior Essex unit would close three electrical wire-manufacturing plants. The closings will result in the elimination of 469 jobs, or about 6 percent of the company’s total work force. The company, which is based in New York, will close plants in Pauline, KS; Glendale, AZ, and Tiffin, OH. The closing completes a previously announced consolidation within Superior’s electrical wire segment.
CHINA
Wave Wireless Announces Wireless Metropolitan Area Network Plan for Mudanjiang City
Wave Wireless Networking has announced a cooperation agreement for building a high-speed wireless metropolitan area network for the Mudanjiang City government. The agreement, between the Northeast Networking Center of Mudanjian City, PRC and Wave Wireless Networking Chinese Representative headquartered in Beijing, China. The entire metropolitan area network has been divided into separate phases. The first phase of this project is worth $750,000 and will connect over 200 government buildings, including administration, police, and other various government services. Plans for continuing phases have not been announced.
EUROPE
France Telecom’s Revenue Rose 9.2 Percent during the Second Quarter
France Telecom posted a strong 9.2 percent rise in revenue for the first half of the year, but released figures that showed its share of France’s long-distance market continues to decline. The former phone monopoly reported consolidated first-half revenue of EU$12.98 billion, compared with EU$11.88 billion in 1998. The company’s Itineris mobile phone division and its international operations were the most visible contributors to the improved numbers. Itineris’s revenue grew 54 percent to EU$1.7 billion, and revenue at international operations rose 41 percent to EU$1.4 billion. France Telecom expects overall revenue growth for the full year to roughly math the 9.2 percent first-half increase.
GTS awarded Class A License to Build and Operate National Fiber Optic Network in Luxembourg
Global TeleSystems Group has received an "A- Class" License, granted by Luxembourg telecommunications regulator ILT, allowing GTS to develop and manage a high capacity national fiber optic network in Luxembourg, over which it would be able to offer a broad portfolio of voice, data and IP services. Robert J. Amman, president and COO GTS, said the Luxembourg market had one of the highest concentrations of international businesses and financial institutions in Europe, and was well situated for access to the GTS backbone.
Hungarian Corporate and Carrier Services Supplier PanTel to Deploy Tellabs’ MartisDXX
Tellabs announced that Hungarian operator PanTel Telecommunications & Communications Company (PanTel) will deploy Tellabs’ MartisDXX managed access and transport network solution to deliver nation-wide managed leased line and IP telephony services over an SDH access network. PanTel CEO Pal Horvath said the MartisDXX solution had been chosen for its ability to provide multiple high-speed services over fiber and copper using a single managed platform, and to seamlessly transfer between other service providers' PDH systems and PanTel's SDH layers.
ECI Telecom Wins US$25 Million ISDN Contract from Telecom Italia
ECI Telecom Ltd. has been awarded a US$25 million ISDN termination systems contract from Telecom Italia SpA. Under the terms of the contract, ECI Telecom will supply its PRONTO+ units to connect small businesses and residents throughout Italy to ISDN services. ECI Telecom’s PRONTO+ offers simultaneous analog and Basic Rate ISDN enabling subscribers to benefit from modern ISDN services, while being able to maintain existing analog subscriber services and equipment.
AboveNet Joins Forms Joint Venture with Gross Partner GmbH to Accelerate Expansion in Germany
AboveNet Communications Inc., the architect of a global one-hop network that brings together high-bandwidth content sites, ISPs, and Application Service Providers in crentralized co-location facilities, has formed a joint venture with Gross & Partner GmbH, a real estate developer in Germany, to acquire a premier 150,000 square foot building in Frankfurt. In addition, the company has purchased an 87 percent stake of World Switch GmbH, a company located in Frankfurt Germany that will develop and manage advanced carrier and co-location facilities. The investment in World Switch will enable AboveNet Communications to accelerate its expansion in Germany. World Switch to the highest technical and security standards required by carriers, content providers, Web-hosting companies, and ISPs would refurbish the Frankfurt center. AboveNet Deutschland will be a major tenant of the center. It will serve as a model for other AboveNet facilities in Europe, offering all tenants the opportunity to participate in AboveNet’s virtual business district on the Internet. AboveNet Deutschland’s ISX will be directly connected to AboveNet’s high-bandwidth Global One-Hop Network, linking ISX members and tenants together and providing them superior Internet connectivity and services.
INDIA
Indian Government will Not Extend Deadline for License Fee Dues
With the Delhi High Court granting approval, the government will not relax the August 15 deadline for receiving upfront the 35 percent of license fee dues, amounting to INR 4 billion from private telecom operators migrating to the new policy regime. Government officials admitted that some of the companies would be handicapped in arranging the funds, especially since considering time has been lost with the matter going to court following public interest litigation. According to a Department of Telecommunications official, the operators were given four months to furnish bank guarantees for the remaining part of their outstanding, as per the recommendations of the financial institutions. The government has also decided to proceed with the signing of the contracts with the operators as soon as the financial details pertaining to the first installment of the license fees owed to the government were tied up.
Bharti Telenet Expands Basic Service Reach
Bharti Telenet, the basic service provider in Madhya Pradesh, has expanded its network in the state, with the launch of new service in Raipur and Jabalpur. Initially, 15,600 telephone lines will be offered in Raipur and 5,000 lines in Jabalpur. The company, which operates basic and cellular services under the AirTel brand name, has completed the commissioning of all five regions, including Indore, Bhopal, Gwalior, Raipur and Jabalpur. AirTel has close to 30,000 customers connected to its network in Madhya Pradesh.
INTERNET/E-COMMERCE
Red Hat Prices Six Million Share Initial Public Offering at $14 a Share
Red Hat Inc. has priced a 6 million share initial public offering at $14 a share. The company, which will trade under the symbol RHAT on the NASDAQ, is a developer and provider of open source software and services, including the Red Hat Linux operating system. The lead underwriter is Goldman Sachs & Co, while Thomas Weisel Partners, Hambrecht & Quist and E-OFFERING Corp. are co-managers. Red Hat has granted the underwriters options to purchase an aggregate of up to 900,000 additional ordinary shares to cover allotments, if any.
AltaVista to Launch Free Internet Access Service
To compete against established Internet access providers, AltaVista will launch a free Internet access service to US subscribers willing to view advertisements instead of paying a monthly subscription fee. The foray into the Internet access business by AltaVista is part of its bid to fortify its existing customer base and attract users by offering direct dial up Web links. However, analysts argue that AltaVista’s move, while is a challenge to access providers such as America Online that rely on monthly access fees, would only niche appeal and would unlikely create a seachange in the way Internet users pay for access. The company was created by Digital Equipment engineers and became a unit of Compaq Computer Corp. when the company acquired Digital. Now the service is being sold to Internet venture fund CMGI Inc. This new venture is a means for the company regains its former status, which was bypassed by rivals such as AOL and Yahoo as they expanded to offer a broader range of services.
SATELLITE
Hughes Electronics Fails to Raise Funds to Save ICO Global
Feeling the sting of the market’s eroding confidence in satellite phone systems, Hughes Electronics’s effort to save ICO Global Communications satellite phone system has fallen short of an initial goal to raise $600 million. Those close to the situation said it could be weeks before it is clear whether the amount investors have offered will keep the $4.7 billion project on track, but that amount was not disclosed. ICO’s offering of shares last month failed to raise the expected $500 and was abandoned. Earlier this week, several strategic investors submitted proposals for a fresh infusion of funds, in response to an ICO offer of certain new classes of shares and notes. The company said in a release yesterday that it and the investors "are now considering a modification to the financing proposal" that would lower the minimum investment needed and permit deferrals of certain payments to suppliers during 1999. Currently, Hughes has invested about $94 million for a 4 percent stake in ICO, and has agreed to nearly triple its investment as part of the rescue package. Under an earlier proposal submitted by ICO’s board, Hughes stake could have increased to between 10 percent and 15 percent. According to ICO officials, the project could close within a month. However, with the latest development, executives said that prospect seems unlikely.
SOUTH AMERICA
Telecom Argentina Third Quarter EPS Remain Flat
Telecom Argentina’s third quarter EPS was unchanged at 0.09 pesos, while earnings per ADR were 0.44 compared to 0.43. Net sales revenues were down to 789 million pesos from 798 million for the quarter. Traffic in minutes was 3.56 billion, up from 3.54 billion. Costs rose to 404 million pesos from 401 million, with operating profit was 170 million pesos compared with 191 million. Nine months EPS fell slightly to 028 pesos from 0.29, while earnings per ADR to 1.41 US to 1.43. Nine months sales rose to 2.38 billion pesos from 2.35 million. The number of installed lines at June 30 was 3.57 million, compared with 3.27 million a year earlier, but the company said there was a substantial decrease in the average use per customer. With the cost of service down 2 million pesos to 1.18 billion, gross profit increased o 1.21 billion pesos from 1.17 billion. The decline in earnings and operating margin was due mainly to a higher tax rate on income and corporate debt, and higher provisions for doubtful debt.
Headlines - August 12, 1999
TOP STORIES
CHINA
EARNINGS/STOCKS
EUROPE
FIBER OPTICS
INDIA
INTERNET/E-COMMERCE
MERGERS/ACQUISITIONS
TOP STORIES
Iridium Defaults on $800 Million Syndicate Loan
Yesterday, Iridium, the struggling satellite phone venture, reported that it is in default of an $800 million syndicated loan, automatically leaving on a second syndicated loan for an additional $750 million. In a statement, the company said, "an event of default has occurred," under bank terms relating to the $800 million loan. Also, the company noted that its deadline for meeting terms of its bank loans had expired yesterday without reaching a resolution with creditors. This admission of default comes after the Chase Manhattan Corp.’s Chase Manhattan Bank, one of Iridium’s major investors, demanded that Motorola guarantee $300 million of the $800 million syndicated loan. However, Iridium said that the company continues to believe that it is not in default to Chase, but it does acknowledge that it is in default of other loan agreements. The company now has until this Sunday to make an interest payment on its high-yield bonds, and those close to the situation feel that the Iridium might be able to get an extension since the company is coming to an agreement with its lenders and creditors.
ExciteAtHome Shares Decline 11 Percent on Report of AT&T’s Talks with America Online
Following reports that AT&T Corp. was in talks with America Online to strike a compromise in the battle over Internet access, the shares of ExciteAtHome fell 11 percent. A report in the New York Times said that AT&T and AOL were discussing ways for AT&T to alter its relationship with ExciteAtHome, which offers Internet access and content through cable modems, could offer AOL’s Internet service on its cable network. AT&T owns a majority stake in Excite AtHome. However, the long-distance giant said that it would maintain their exclusive relationships that exist between AT&T and cable partners of Excite At Home, which will extend till 2002. Analysts would like to see AT&T and AOL to reach an agreement to resolve the battle over whether AT&T should be forced to open the cable lines it is acquiring. Recently AOL has launched a nationwide campaign to convince local regulators to force the cable companies and AT&T to open their networks to competitors for little or no fee.
Tyco International to lay Off 9,350 Workers, Plans 7,000 Additional Cuts
Following a series of strategic acquisitions, Tyco International announced that it has laid off about 9.350 workers in the past nine months and plans 7,000 more layoffs as it makes the new units more efficient. Currently, the company has approximately 140,000 workers. One unit that has suffered the most layoffs has been in their AMP unit, where its is the process of laying off more than 8,400 people. Also, the company said that an undisclosed number of the layoffs are occurring at US Surgical Corp., with smaller numbers at several other acquired companies.
Cisco’s Fourth Quarter Sales Up 48 Percent on Rise of Internet Growth
Fueled by a strong growth trend of the Internet, Cisco Systems reported that its fourth quarter sales were up 48 percent. Cisco reported fourth quarter pre-exceptional EPS of 21 cents, compared with 16 cents in 1998, and expectations of 20 cents. Net sales for the fourth quarter were 3.55 billion, compared with 2.40 billion in 1998.
Silicon Graphics to cut up to 1,500 Jobs and Spin off Media Base Business
Silicon Graphics announced a measure to eliminate up to 1,500 jobs, or 16 percent of its workforce, in its second restructuring this year, and will also sell its Cray supercomputer division and spin-off its MediaBase business. The company has formed a separate business unit to manage its Cray supercomputer division and is in discussions with potential to assume the operation of this business. In addition to their restructuring process, SGI has reached a preliminary understanding with another computer systems company to form a joint venture for development and distribution of its Visual Workstation line based on Microsoft’s Windows NT operating system. However, terms of this venture have not been finalized.
CHINA
Nokia Wins US$13 Million Order to Expand Hunan Unicom’s GSM Network
Nokia Corp. has won a US$13 million order to expand Hunan Unicom’s GSM network in the cities of Changsha, Zhuhou and Xiantang. Deliveries, which will begin immediately, will include switching centers, base stations and base station controllers. Nokia will also provide a range of customer services.
British Telecom Considers Expansion in China
British Telecommunications PLC wants to expand in China believes Beijing’s entry into the World Trade Organization would open up business opportunities. Following China’s expected entry into the WTO, BT president Peter Bonfield said, the company wants to further expand its operations in China. "It will be our intention then to seek a local Chinese partner or partners to work with those to expand our operation into China," he said. British Telecom signed up a deal with China Telecom Ltd. in March 1998 to distribute some of BT’s worldwide services. Meanwhile, Bonfield said the final agreement on BT and AT&T Corp’s acquisition of a 30 percent stake in Japan Telecom will come by the end of this month.
EARNINGS/STOCKS
Oak Industries’ Third Quarter Net Income Falls Short, and Stock Declines 32 Percent
Oak Industries, a maker of electrical components for telecommunications systems, reported that it expected third-quarter net income to fall short of analysts’ expectations, setting off a 32 percent decline in its stock price. The company said it revised its estimate of 49 cents to 52 cents, which was in line with the average estimate of four analysts surveyed by the First Call Corp. Company shares fell $13.25, to $27.75. Oak attributed the shortfall to a loss of revenue at its Lasertron fiber optic division.
EUROPE
Philips Semiconductors Awards Philips Unit Origin Supply Chain Contract
Philips Semiconductors awarded Philips unit Origin BV a worldwide contract to optimize its entire supply chain. Under the terms of the agreement, Origin will take full responsibility for the worldwide implementation, streamlining and integration of SAP AG and i2 software planning, logistics, production, order processing, financial and other processes at Philips Semiconductors with Origin holding responsibility for managed operations. The first implementations will take place in the US followed by Asia and Europe.
Ericsson Signs Wireless Internet Deal with Turkcell
LM Ericsson Telefon AB has signed its first deal for its new WISE high-speed Internet solution service with Turkish operator Turkcell for an undisclosed sum. Johan Wicklund of Ericsson Corporate Communications said, "due to the extremely competitive nature of the Turkish market, Turkcell did not wish the sum disclosed. However, from our point of view I would say the deal was of more strategic value than financial, being as it is the first deal for WISE." Also, the company expects to secure further contracts involving WISE, mainly in developed markets, in the near future.
Colt Telecom Reports 53 Percent of Turnover Comes from Non-UK Sources
Colt Telecom reported that for the first time, over half of its turnover is coming from outside its core City of London market, with Germany a particularly a strong contributor. For the second quarter, the company reported revenue of 94.3 million stg, an increase of 104 percent from 1998, while gross profit was 18.0 million stg, up 108 percent. For the first six months of 1999, turnover was 179.1 million stg and gross profit 33.8 million. One of the contributing factors to Colt’s success during the quarter was a result of the launch of new services in Barcelona, Cologne, Geneva, Lyon and Vienna, with networks in Marseilles and Rotterdam expected to be in operation by the end of the year. Initial construction has been on its 5,000-km intercity network, while Colt Internet services are now available in five countries. UK turnover was 44.1 million stg, up 39 percent, with growth from non-switched services particularly strong. The company gained 127 customer accounts and 55 buildings,
while minutes carried were up 60 percent to 938 million. In Germany, turnover rose 137 percent to 28.8 million stg for the quarter, reflecting organic growth and expanded services. Finally, turnover in France was 11.6 million stg, with switched minutes carried totaling 201 million and other European centers contributed 9.8 million stg.
Mannesmann Issues EU$2 Billion European Commercial Paper Program
Mannesmann AG and Mannesman Finance BV have signed a European commercial paper program with a volume of 2 billion eur. The issue will guarantee by Mannesmann AG, which will offer further flexibility to optimize Mannesmann’s financing structure. The program has been arranged by Deutsche Bank AG with Barclays PLC, Deutsche Bank, Dresdner Bank AG, Goldman Sachs, Warbur Dillon Read and West LB acting as dealers.
FIBER OPTICS
American International Group Launches Venture to Allow Trading of Network Capacity
American International Group, a New York insurer, said its AIG Trading Group unit would launch a central marketplace for wholesale telecommunications capacity. The new venture will allow telephone companies and others to trade and deliver bandwidth. The explosion of data traffic over telephone lines has prompted the construction of telecommunications networks. This service aims to match up suppliers with carriers that need additional bandwidth, and will be similar to marketplaces for natural gas and electricity.
INDIA
Himachal Futuristic Communications May Secure INR 340 Million Deal to Acquire Botswana Telecom
Himachal Futuristic Communications Ltd. (HFCL) is likely to win an order Botswana Telecommunications Corporation (BTC) for the supply of wireless in the local loop (WLL) equipment. In a global tender invited by Botswana Telecom, HFCL has emerged as the lowest cost bidder among telecom majors Mitsui, Alcatel, Siemens, Lucent and such others. HFCL will supply the WLL system based on the CorDECT technology developed by IIT, Chennai, to BTC. While HFCL's bid at US$7.84 million (INR 340 million) was just about a fourth of Siemens' $27 million, it was less than half of Lucent's bid of US$15 million and Alcatel's US$18 million. Botswana Telecom had invited a tender for field survey, provisioning, installation and commissioning of fixed wireless access, including all associated infrastructure requirement on full turnkey basis. While HFCL has shown its metier by supplying a wide variety of telecom equipment of domestic basis and cellular operators, the export effort could re-orient the way HFCL functions in the future, with a strong thrust emerging into the overseas markets.
Ericsson to convert its Telecom Joint Venture into Wholly Owned Subsidiary
Ericsson is currently in the process of consolidating its Indian operations by converting one of its manufacturing joint venture companies-Ericsson Telecommunications Ltd. into a wholly owned subsidiary. Currently, Ericsson owns 51 percent stake in ETL while the balance is held by non-resident and resident Indian shareholders. The Swedish company will acquire the balance 49 per cent stake to gain 100 percent control in the Indian Company. Once the deal is through, TLM Ericsson would have two subsidiaries in India-ETL and the existing Ericsson Commissions Ltd. The telecom multinational has already received an approval from the Foreign Investment Promotion Board (FIBP) for acquiring 9.8 lakh shares in ETL, constituting 49 percent shares of a face value of INR 100 each worth INR 98 million.
Ericsson Expands Presence in India through Establishment of Three Companies, ETL, ECL and Ericsson India Ltd.
ETL, which has equity of INR 200 million and is engaged in the business of manufacturing AXE transmission and switching systems, has installed a new manufacturing plant in Jaipur with capacity to manufacture 60,000 line per year. ECL, the only subsidiary of TLM Ericsson till now, is engaged n the business of providing installations and supports services to GSM operators and mobile networks. EIL, a joint venture between the Jiwarajka group and Ericsson where the Indian partner holds a majority 60 per cent stake, is engaged in the business of manufacturing manual switch boards in the country, mainly catering to defense requirements.
Bharti Telecom to Spin off Telephone Manufacturing Business
Bharti Telecom will spin off its telephone manufacturing business into a new company, Bharti Teletech. With the separation of manufacturing, Bharti Telecom will become the group's holding company for our telecom service ventures. Bharti Telecom has two factories manufacturing phones located at Ludhiana in the northern state of Punjab and Gurgaon near Delhi. Phone-maker Goa Telecom, a wholly owned subsidiary of Bharti Telecom, will also be merged into Bharti Teletech. The decision to hive off its phone manufacturing business from Bharti Telecom is part of a restructuring process started last year to separate its services and manufacturing activities. As part of the process, the equity stakes Bharti Telecom, a joint venture with Siemens India will be transferred to Bharti Teletech. The Bharti group controls two mobile phone networks in Delhi and the northern Hill State of Himachal Pradesh and a fixed-line phone license in the central Indian State of Madhya Pradesh. The group's investments in these networks are routed through Bharti Telecom, a joint venture with British Telecom, and the fixed-line phone license in Madhya Pradesh and mobile phone network in Himachal Pradesh are part of a venture with Telecom Italia.
Ind-TeleSoft Launches New US-Based Software Company Xybridge Technologies
As Ind-TeleSoft continues to target to global telecommunications market, the company has set up a company in the United States called Xybridge Technologies Based in Texas, which will market and support the complete range of communications software products developed by Ind-TeleSoft. It recently launched two voice over Internet protocol applications called the SmartWorks Media Gateway Framework (MGF) and the Smart Works Call Agent. Xybridge Technologies will take care of worldwide marketing and support of the Smart Works suite of product, developed by TeleSoft. The company has earmarked an investment of US$1 million in the new initiative. It is also in talks with a few venture capitalists that have shown interest to invest in this start-up. Ind-TeleSoft will decide on one of them soon. Xybridge’s new product, SmartWorks Call Agent, provides Java-based infrastructure for the creation of fully distributed Call Control applications in a heterogeneous network environment. SmartWorks seamlessly bridges Internet Protocol, Public Switch Telephone Network, and ATM network to provide a service delivery platform that transcends these network boundaries. Combined with third party telephony hardware and Operational Support Systems, SmartWorks provides a ready to deploy call-processing solution.
INTERNET/E-COMMERCE
Qwest to Launch Combined Internet Access and Long Distance Service
As competition in the long-distance telephone market price war continues to heat up, Qwest Communications is expected to launch its own service that combines Internet access and long-distance services. This move comes only one day after MCI WorldCom said it would lower rates on many of its calls to a nickel a minute. Under Qwest’s new plan, the company will offer unlimited Internet access and 250 minutes of long-distance calling for $24.95 a month. Paul Wright, an analyst with Loomis Sales in Boston, said the move reflects the long-distance companies anticipation of the Baby Bells entry into the long-distance market. In response to MCI WorldCom’s new plan, AT&T decided not to match their offer because it would rather focus on selling bundles of services, which is where it feels the market is really headed.
Sprint to Launch Wireless Internet Access Service
Sprint Corp. plans to launch a wireless Internet access service, which will be available by late September. Sprint’s wireless communications unit Sprint PCS Group will offer the new services, which will be called Sprint PCS Wireless Web. With the new service, mobile telephone customers will have access to some Web content and will be able to have information from Yahoo, like news and weather updates, delivered to their telephones. In addition, Sprint will offer a wireless Web connection that will allow users to gain access to laptop and hand-held computers through their mobile telephones instead of a telephone line.
MERGERS/ACQUISITIONS
Broadcom to Acquire Altocom Inc.
The Broadcom Corp., a manufacturer of high-speed communications chips, has agreed to acquire Altocom Inc. for 1.61 million class B shares. Altocom, based in Mountain View, CA, makes software that aids data and fax transmissions over modems. Broadcom’s chips are used in devices ranging from personal computers to cable modems and set-top boxes. Broadcom’s class B shares, which are not publicly traded, are identical to the class A shares except for certain voting rights.
Headlines - August 11, 1999
TOP STORIES
BRAZIL
CABLE OPTICS
EUROPE
INDIA
INTERNET/E-COMMERCE
JAPAN
MEXICO
TOP STORIES
SBC Corp. Enters Negotiations with Bell Atlantic to Provide Local Telephone Service in Boston
Yesterday SBC Corp. entered into formal negotiations with Bell Atlantic to develop an agreement that calls for SBC to provide local telephone service in Boston and 100 surrounding communities by the fall of 2000. In order to gain approval for its acquisition of Ameritech, regulators have imposed a condition that the SBC become a local telephone provider in three markets outside its region within a year after merger approval, and in 27 more within 30 months, or be faced with millions in fines. SBC has chosen Boston, Miami and Seattle as the first three cities where it will seek to become a local provider in the city’s metropolitan statistical area, which in Boston extends into Southern New Hampshire. Stephen Carter, SBC president of strategic markets, feels that the negotiations will move fast because Bell Atlantic must show that it is promoting local competition to enter Massachusetts’s $2 billion long distance phone market.
EMC Acquires Data General for $1.1 Billion
As computer companies have begun to respond to the burgeoning growth of the Internet, the EMC Corp., a data storage equipment provider, announced that it would acquire the Data General Corp for $1.1 billion in stock. Both Data General and EMC manufacture data storage devices, including high-capacity disk drives to disks and tape units, which networks depend on to distribute data over them. EMC’s products are designed for the largest mainframe computers, while Data General’s are aimed at smaller midrange computers that run Unix or Windows NT operating systems. Upon completion of the deal, Data General’s computer systems business Aviion, will operate as a separate unit. Analysts see the deal as beneficial for both companies. For EMC, the company will be able to broaden its product offerings away from the mainframe market to gain access to a broader range of customers, particularly those that run network servers and other midsize computer systems. And for Data General, which has been sluggish in recent years, the company’s strong product base would benefit from EMC’s robust sales structure.
American Tower to Acquire 2,100 Cellular Towers from Vodaphone AirTouch PLC for $800 Million
As it continues in its shopping spree for cellular towers, Boston-based American Tower Corp. has acquired 2,100 towers from Vodaphone AirTouch PLC for $800 million. This latest deal brings American Tower almost halfway to its goal of owning or operating 15,000 tower around the country by 2003. Under the terms of the agreement, American Tower will pay Vodaphone$800 million in cash for a master sublease agreement, covering the 2,1000 towers, and will give Vodaphone warrants to purchase 3 million American Tower shares for $22 each any time during the next five years. Also, American Tower will lease back equipment on the towers to AirTouch and will be permitted to use them to install equipment to serve rival wireless operators.
Cisco Systems Reports 50 Percent Rise in Fourth Quarter Sales
Feeling the benefits of the alarming growth of the Internet, Cisco Systems reported a 50 percent rise in fourth quarter sales and earnings, beating estimates by a penny a share. The company said it experienced the brunt of its growth from telecommunications service providers upgrading their networks to offer combined voice and data lines, as well as from small business customers adding Internet connections and internal networking. For the fourth quarter, the company reported pro forma earnings, excluding acquisition related charges of $727 million, or 21 cents a diluted share, up 38 percent from $525 million, or 16 cents a share, in the same period of 1998. Company sales rose 48 percent, to $3.55 billion, compared to $2.40 billion in 1998.
Global Crossing Launches US$100 Million Customer Finance Program with Newcourt Capital
Global Crossing Ltd. has launched a $100 million customer finance program for broadband capacity purchases on Global Crossing’s worldwide network. The new program is a partnership between Global Crossing USA Inc, a subsidiary of Global Crossing Ltd., and Newcourt Capital, and the corporate finance subsidiary of Newcourt Credit Group. The program will provide financing to select customers including Internet service providers, data companies, and telecommunications providers. Financing under the program will cover up to 100 percent of the cost of capacity purchases on the Global Crossing Network.
MCI WorldCom Shares Drop 5.4 Percent on Lower Long Distance Rates
Shares of MCI WorldCom Inc. were 5.4 percent lower after the company extended its ‘5 cent Sundays’ pricing formula to every day, touching off investor concerns that the low rate will erode profits. This follows an earlier announcement that the carrier will allow customers to pay 5 cents per minute on all residential state to state calls between 7:00 PM and 7:00 AM, along with weekday daytime calling for 25 cents per minute. The new rate also includes a 5 cents per minute rate plan all day on Saturday and Sunday and a monthly fee of $1.95. Analysts believe that investors appeared to react nervously to the news because the long-distance residential divisions of major telecommunications providers have been declining in profitability.
Gateway Inc. Approves 2-for-1 Stock Split
Gateway Inc. announced that its board of directors has approved a 2-for-1 common stock split. Shares will be distributed on or about September 7, to shareholders of record on August 20. After the split, Gateway will have approximately 315 million shares outstanding.
BRAZIL
AES Bandeirante Empreendimentos Ltda Acquires 51 Percent Stake in Eletronet for R$290 Million
AES Bandeirante Empreendimentos Ltda, an affiliate of the US energy company AES, purchased a 51 percent stake in data transmission venture Eletronet for the base price of R$290 million in an auction on the Rio de Janeiro stock exchange. Electronet will be 51 percent owned by AES and 49 percent by Light Participacoes SA, a subsidiary of Centrais Electicas Brasileiras SA. AES was the only bidder after three other potential participants declined to deposit guarantees with stock exchange house CLC. The Eletropar consortium led by Grupo Opportunity, National Grid Group PLC and CS Participacoes Ltda. all withdrew from the auction.
CABLE OPTICS
Comcast to Increase Stake in Jones Intercable for $840 Million in Stock
The Comcast Corp. announced that it would double its stake in Jones Intercable Inc. for about $840 in stock, taking advantage of the recent decline in Jones’s shares. Comcast, which in April acquired a 39 percent stake in Jones, will swap 1.4 shares of its class A common stock for each Jones class A and common share, or $50.31 each. Jones’s class shares had dropped 26 percent after hitting a record high in May. The move comes as cable companies seek larger regional subscriber groups to reduce costs, and as they offer more features such as Internet access and phone services.
EUROPE
Tele Danmark AS to Invest US$367 Million to Expand in Norway and Poland
Tele Danmark announced that it would invest US$367 million to expand their reach into Norway and Poland as competition increases in their home base. The company, a former monopoly, acquired a 19.6 percent stake of Netcom ASA, Norway’s second largest mobile phone company, for US$347 million from Singapore Telecommunications Ltd. In addition, Tele Danmark will invest KR$135 in a Polish company, Polkomtel SA, of which it owns 19.3 percent, and is considering increasing its 20.8 percent stake in Ceske Radioommunikace AS of the Czech Republic.
BT Cellnet Prepaid Phone Prices May Rise to Counter Arbitrageurs
The price of British Telecommunications PLC’s BT Cellnet prepaid could increase as the mobile network operator protects itself from arbitrageurs. Lately entrepreneurs have been taking advantage of the difference in prepaid phone prices in the UK and on mainland Europe. Phones sold in UK supermarkets including Tesco PLC, J Sainsbury PLC and Asda PLC for 39.99 stg, but can be sold in Europe for about 120.00 stg. Arbitrage is not illegal and its emergence could prove profitable for embattled traders at a time when British consumers are inclined to think that most durable goods, notably cars, are more expensive in the UK than in European countries. However, the activity results in significant losses for Cellnet, which is due to the way mobile phones are sold in the UK. Typically, service providers, such as Cellnet, subsidize the price of phones to promote sales, expecting to recoup losses through usage fees. Cellnet purchases phones from manufacturers for about 60.00 stg each, but then sells them to supermarkets as prepaid for about 30, leaving it to the supermarket to decide what mark up it will charge.
UPC’s Priority Telecom Forms New Mobile Telephony and Internet Unit; Acquires 13.3 Stake in SBS Broadcasting for US$102 Million
UPC Priority Telecom has formed a new mobile telephony and Internet division within its Priotiy Telecom unit. The new unit will be called Priority Wireless Communications and will be responsible for developing business opportunities in wireless communications across Europe. The new unit will distribute the Priority Telecommunications telephony and Internet services. In related news, the company has acquired a 13.3 percent stake in SBS Broadcasting SA for US$102 million. This investment represents a part of a broader alliance with SBS that may lead to joint cooperation business opportunities in countries across Europe where SBS’s and UPC’s business activities overlap. As announced in June, UPC agreed to backstop the conversion of SBS’s convertible subordinated debentures due in 2005. Following the conversion, UPC acquired the debentures, which are converted into 847,680 SBS shares.
INDIA
Tata Cellular Sets 60,000 Subscriber Target in Andhra Padesh
Tata Cellular has set a target of 60,000 subscribers to be hooked up in its network in Andhra Padesh by March 2000. At present, the company has 43,000 customers in the state and about 20,000 of them are in the coastal areas from Guntur to Viskhapatam
Tata Electric Companies to Invest INR$3 Billion in the Telecommunications Sector
Tata Electric Companies (TEC), which is comprised of the Tata Power Company, Andhra Valley Power Supply Company Ltd. and Tata Hydro-Electric Power Supply Company, has decided to make investments to the tune of INR 3 billion in the telecom sector as part of its proposed diversification. Addressing the company's annual general meeting (AGM) here on Tuesday, TEC chairman Ratan Tata said the company "has already made significant investments in Tata Telecom Services." Whereas the investments already made are primarily in basic services, the company would also look into opportunities in Internet bushiness. TEC has sketched out a INR 48 billion expansion over the next three years, they said. Of this, INR 18 billion would be invested in the company's licensed area while about INR 25 billion go into other power projects. TEC would invest about 5.50 billion in other ventures, out of which INR 3 billion would fund its telecom foray while the remaining INR 2.50 billion would be TEC's share in the joint venture liquefied natural gas (LNG) project with Total of France. Addressing the AGM, Mr. Tata said the stake of the Tata Group in TEC had risen to 71 per cent now as against 51 per cent now as against 51 percent in the corresponding period last year.
INTERNET/E-COMMERCE
AT&T has Met with AOL, but No Specific Proposal has Been Discussed
AT&T Corp. has reaffirmed its relationship with ExciteAtHome but added that it has met with America Online executives but is not currently holding talks on any specific proposal with them. The carrier’s statement follows earlier press reports which said AT&T is in negotiations to provide AOL with enhanced access over its cable network. In the statement, AT&T said it plans to honor and respect its contract with ExciteAtHome to provide exclusive Internet access over its cable network. A recent report in the New York Times said that AT&T is considering an agreement to open its cable network with AOL and other ISPs, diminishing ExciteAtHome’s position. AT&T said it remains open to any discussion with other Internet access providers about possible commercial relationships when its current contract with ExciteAtHome expires in 10 years. However, the long distance carrier anticipates a long-term relationship with ExciteAtHome. Currently, AT&T owns a 58 percent stake in ExciteAtHome, but speculation has grown that the company may sell off the Excite content arm of the company and focus on providing Internet access through AtHome.
JAPAN
Softbank Company Negotiating Telecommunications Venture with Tokyo Electric Power Company and Microsoft Corp.
Softbank Company is currently negotiating with the Tokyo Electric Power Company and Microsoft Corp. on a joint telecommunications venture. This follows an earlier report that the three companies had agreed to set up a wireless Internet connection service. Although Softbank and Tokyo Electric Power confirmed the talks, neither would give any details.
MEXICO
New Iusacell Series V ADSs to be listed Under NYSE Symbol CEL
Neuvo Grupo Iusacell announced that its Series V American Depositary Shares are listed on the New York Stock Exchange and its series V shares are listed on the Bolsa Mexicana de Valores under the same symbol, CEL. The series D and Series L shares Grupo Iusacell SA de CV not tendered in the recently expired exchange offer will continue to be traded on the BMV under the symbols CEL.D and CEL.Y, respectively, until such time as New Iusacell has met the conditions for delisting. Old Iusacell’s Series D American Depositary Shares have been delisted from the NYSE, but its Series L American Depositary Shares will trade on the NYSE under the symbol CEL.Y until the conditions for delisting have been met.
Headlines - August 10, 1999
TOP STORIES
BRAZIL
EUROPE
FIBER OPTICS
MEXICO
UTILITIES
TOP STORIES
Lucent Technologies to Merge with International Network Services
As it continues in its efforts to maintain its place in the converging voice and data communications market, Lucent Technologies will merge with International Network Services. Under the terms of the agreement, each share of INS will be converted into 0.8473 shares of Lucent. Based on Lucent’s closing price of $63-5/8 on August 9, the merger would be valued at approximately $3.7 billion, or about $54 an INS share, on a fully diluted basis. The merger will be completed during Lucent’s first quarter fiscal 2000, which ends on December 31, 1999, and will be accounted for as a pooling of interests. Lucent expects the merger to be neutral to earnings in fiscal 2000.
Sycamore Networks Inc. Files Registration Statement for Initial Public Offering
Only months after the company had secured contracts to supply their equipment to the growth of Williams Communications fiber optic network, Sycamore Networks Inc. announced that it has filed a registration statement with the Securities and Exchange Commission for an initial public offering of its common stock. All shares will be offered by Sycamore. The offering includes shares that the underwriters will have an option to purchase from Sycamore solely to cover over allotments, if any. The proceeds of the offering will be used for general corporate purposes, including working capital and capital expenditures, and the repayment of debt. Morgan Stanley Dean Witter is acting as lead manager and J.P. Morgan & Co., Lehman Brothers and Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, are acting as co-managers of the offering.
BRAZIL
Anatel to Sell Tele Centro Sul Mirror as Single Concession
Telecom regulator Anatel will sell the "mirror" company to operate fixed telephony services in competition with Telecom Italia SpA in the Tele Centro Sul concession area will auctioned on August 27 as a single concession. After three failed attempts to sell the concession, Anatel said that it may divide the concession and allow companies to bid to operate fixed telephony services in individual states and even cities within the huge area which covers 10 states in the southwest and south of Brazil. But as 10 of the 14 companies that registered an interest in the Tele Centro Sul mirror said they planned to bid for the entire area, Anatel decided to keep the area intact. Companies must submit guarantees of R$30 million to the Rio de Jainero stock exchange clearing house on August 26.
EUROPE
European Commission Considers Blocking BBC’s Digital Television License
The European Commission could declare the BBC’s proposed levy for digital television illegal. According to sources close to the situation, British Sky Broadcasting PLC, Ondigital and ITV companies are considering asking the commission to launch an investigation into whether the UK government approves the plan to charge viewers an extra license fee for BBC digital television service. One terrestrial TV company, throughout to be Granada Group PLC, has been advised by lawyers that the digital fee, proposed by a government appointed panel during the week of August 3, could infringe EU rules on state aid.
European Personal Computer Sales Up 20 Percent
Personal computer shipments in Europe rose 20 percent in the second quarter from 1998 to 6.3 million units, buoyed by demand for Internet use and by lower prices, according to a recent survey by market researcher Dataquest. Leading the race was Compaq Computer which maintained its market share at 16.9 percent of the overall shipments, but saw unit shipments grow at 16 percent from 1998, lower than Dell Computer Corp’s 38.3 growth rate. Dell’s market share grew by 15 percent from 1998 to 9.6 percent of overall shipments, followed by IBM with 8.8 percent of the overall market, and unit growth of 41.2 percent. Hewlett Packard was fourth in market share with 6.8 percent, and unit growth of 49.1 percent. PC shipments were led by growth in the UK, where unit shipments rose 31 percent from a year earlier to 1.1 million units, while shipments in France increased by 37 percent to 868,000. Analysts noted professional shipments rose 20.6 percent to 4.9 million units, despite concerns that information technology spending will trail off because of the Year 2000 bug. The home PC market grew 18.3 percent in the second quarter to 1.5 million units, led by the demand for Internet access and falling prices.
Olivetti to Sell 80 Percent Stake in Olivetti Ricerca to Getronics for 34 Billion Lire
Olivetti SpA has finalized a deal to sell an 80 percent stake in Olivetti Ricerca Getronic NV unit Wang Global SpA for 34 billion lire. Currently, Wang Global holds a 19.9 stake in the company.
Government Says Telecom Italia Must Renegotiate Tariffs
The public administration must renegotiate its tariffs with Telecom Italia SpA and decide whether to use competing carriers, according to a directive by the Prime Minister’s office undersecretary Franco Bassanini. The directive said that the public administration can sign contracts with other carriers immediately and must submit a procedure to choose a carrier by January 1, 2000 at the latest.
Global One to Launch Major Enhancements to its Global ATM Backbone Network
Global One announced the operational implementation of 11 new global transit switches and over Gbps of transmission capacity on its end-to-end multi-service ATM backbone network. In addition to the 11 global transit switches, Global One has also added a further 1 Gbps of bandwidth to the 5 Gbps already announced on the Global One ATM backbone network. Operational capacity will be extended by a further 5 Gbps planned in the coming months. To carry out this project, Global One selected the Siemens/Newbridge Main Street Xpress ATM multiservices switches. The new global transit switches are interconnected with the networks of the Global One shareholders and with the current Global One Nortel-based multi-service access and regional switches.
FIBER OPTICS
Greiner-Pacaud and Hamilton Choose Norstan to Constuct Building Backbone and Managed Services
Norstan announced that Greiner-Pacaud/Hamilton Management (GPH), a Toronto real estate investment firm, had awarded Norstan's Canadian subsidiary a contract to transform an existing Toronto commercial industrial building at 720 King Street West, Toronto, into what Norstan described as "smart" building. The first phase involves the installation of a fiber backbone to supply ample bandwidth for the second phase, which is due for completion in September. This would provide a wide array of optional communications services available under what Norstan and GPH called the Managed Services scheme, including a complete telephone system, data systems, local and long distance services, call center technologies and voice and video conferencing. The equipment and services are to be supplied by Siemens Communication and Information Networks, Lucent, PictureTel, AT&T Services, Cisco, 3Com and IBM Network Services. Under the Managed Services scheme it would install and maintain all equipment and
tenants would contract with Norstan to access only the managed services they needed, charged on the basis of usage or monthly service fees.
MEXICO
Avantel Awarded Mexican Local Services License
Beginning in January 2000, Avantel would offer local wide-band, high-speed transmission capacity telephone service, mostly to businesses located near the company's existing urban fiber optic rings. Avantel expects somewhere between 2 percent and 6 percent of the company's 900,000 long-distance customers to take up the service.
UTILITIES
ZipLink Sign 3-Year Deal with NEON for OC-3 Capacity
Backbone provider ZipLink and NEON Networks has signed a three year Master Services Agreement for the acquisition by ZipLink of OC-3 capacity with an open-ended upgrade capability to OC-12 and OC-48 service in Lowell and Boston, Hartford (Connecticut) and New York City. This will expand ZipLink's current 45 Mbps ring in the Boston area to a 155 Mbps beyond Boston through Connecticut and New York, more than tripling its current capacity in these areas.
Pathnet Inc. and Tri-State Utility Group to Jointly Construct 640 km Fiber Optic Network
Pathnet Inc. has entered into a joint co-development agreement with Tri-State Generation and Transmission Association a 640-km fiber optic network connecting Grand Junction Colorado to Albuquerque New Mexico. Dick Jalkut, Pathnet president and CEO, said that the new route, when coupled with Pathnet's existing Chicago to Denver route, would provide a complementary and unique network alternative for customers wanting to reach second-and third-tier and under-served markets. Frank Knutson, Tri-State GM, said that the entire region, particularly the Four-Corner area, had traditionally been starved of broadband services. Apart from the obvious benefit to businesses, various public services, schools and government agencies would also benefit from the project.
United Telecom Council to Hold Legal Seminars to Help Utility Counsel Deal with Telecommunications Issues
The United Telecom Council will hold two legal seminars in September to help counsel those who traditionally work with electric, gas, or water utilities gain an understanding of today’s telecommunications technology and the regulatory issues that govern its deployment. The seminar, open to all attorneys, telecommunications professionals and others responsible for telecommunications functions, will provide an overview of telecommunications law as it affects the utility industry and other critical infrastructure industry companies. The first seminar will be held September 16-17, in Washington, DC at Swissotel Washington, The Watergate. The second, held in Arlington, TX, September 30-October will be held at the Wyndham Arlington D/FW Airport South. The identical seminars, entitled "Utility Telecommunications: Navigating the Legal & Regulatory Minefields" will open with a non-technical overview of the various telecommunications systems used by utilities, pipelines and other critical infrastructure companies to manage and control the underlying utility plant. They will use this overview as a base to cover the legal and regulatory paradigms that affect utility telecommunications
Headlines - August 9, 1999
TOP STORIES
Deutsche Telekom to buy One2One
Deutsche Telekom has agreed to acquire the British Wireless phone operator One2One for US$11.12 billion, according to a report in The Wall Street Journal. Deutsche Telekom considers the deal vital as it seeks to expand beyond the German market into Britain and other emerging regions. Sources close to the deal said that with the One2One transaction out the way, Deutsche Telekom is now likely to pursue a US target. One potential target is Sprint Corp, of which Deutsche Telekom owns 10%. The two companies have held early-stage talks, but it is far from clear whether a deal will occur.
Sprint Forms Broadband Wireless Group to Deploy Fixed Wireless Broadband Services Across the U.S.
Sprint has created a new organization, which will build facilities and develop wireless broadband services that the company will deliver over the nationwide fixed wireless network that it’s creating. Sprint is awaiting final Federal Communications Commission approval to acquire five companies with licenses in the Multichannel Multipoint Distribution Service (MMDS) spectrum: Peoples Choice TV, American Telecasting, Inc., Transworld Telecommunications Inc., Videotron USA, and WBS America. These licenses will give Sprint up to 200 MHz of spectrum in over 65 markets across the nation, covering about 30 million households. Broadband Wireless Group (BWG) will be responsible for building a broadband fixed wireless network in these markets, and bringing to market a high-speed Internet service for homes and small businesses that will compete with cable data offerings, the xDSL offerings of the local Bell companies and with data CLECs. In addition, the Broadband Wireless Group will work with Sprint's Consumer Services Group, Sprint Business and other parts of NIS to roll out the Sprint Integrated On-Demand Network (Sprint ION) over the wireless infrastructure.
MCI WorldCom Launches 'MCI 5 Cents Everyday'; Customers Receive 5 Cents Every Evening During the Week and All Weekend Long
Building on the momentum created by MCI 5 Cent Sundays, MCI WorldCom has announced its latest residential calling plan -- MCI 5 Cents Everyday. Now consumers can receive five cents per minute on all state-to-state calls, every evening during the week and all weekend long. MCI 5 Cents Everyday offers five cents per minute on all residential state-to-state long-distance calls made between 7:00 p.m. and 7:00 a.m. and all day Saturday and Sunday, along with weekday daytime calling for 25 cents per minute, for a monthly fee of just $1.95. For customers who primarily call during weekday daytime hours MCI WorldCom offers MCI 5 Cents Everyday Plus -- five cents per minute from 7 p.m. to 7 a.m. and 10 cents per minute for weekday daytime calling for a monthly fee of just $4.95.
Cisco’s Deal with KPMG Faces Regulatory Challenges
According to a report in The Wall Street Journal, a plan by Cisco Systems Inc. to invest $1.05 billion in a large portion of accounting firm KPMG’s global consulting arm faces significant regulatory hurdles. On Saturday, Cisco said it would buy a 19.9% stake in a new business that would be called KPMG Consulting. KPMG would own the remaining 80% or so of the entity, which would wrap together KPMG’s consulting practices in North and South America, as well as parts of Asia (KPMG’s European practice won’t be included in the deal). KPMG hopes to take the new entity public eventually. KPMG plans to use the capital to build six technology centers that will be staffed with 4,000 of its consultants to deliver Internet-based data, voice and video consulting services to Cisco’s clients. The deal marks the first attempt to date by a Big Five firm to incorporate its consulting practice and is the biggest consulting arrangement Cisco has entered thus far. For Cisco, the alliance is a way to augment its business easily. Cisco typically doesn’t help customers install or maintain equipment, a gap KPMG now hopes to fill for the company. But the deal marks a bold and risky gambit by KPMG. The SEC can still nix the transaction by deeming it to be in violation of the agency’s auditor-independence rules, agency officials said. The rules are intended to shield public auditors against any conflicts of interest, including pressures from the accounting firms’ consulting divisions to go soft on their audits of corporate clients.
KPMG doesn’t audit Cisco. However, the SEC finds problematic the various business relationships outside companies such as Cisco bring to such transactions. That would include the dozens of alliances Cisco has with other public companies, many of which can be or eventually could become KPMG audit clients. To date, the SEC hasn’t brought any enforcement or disciplinary action against a Big Five firm over these kinds of conflicts. However, the agency already has told KPMG that any outside ownership in a division controlled by the firm, while KPMG still maintains an audit practice, could place the firm in violation of the SEC’s auditing rules.
France Telecom Receives Complaint from Regulator
The French telecommunications regulatory body delivered a formal ultimatum to France Telecom, alleging anticompetitive practices and carrying the threat of possible fines or the suspension of the carrier’s license, according to a source close to the issue and a report in The New York Times. The regulator’s complaint, which France Telecom will likely contest, centers on two issues. First, it criticizes the phone company for not making its list of calling rates widely available to customers and competitors. Second, it says France Telecom jumped the gun last month when it began offering discount rates for some consumers who dial a special code before making each call. France Telecom wasn’t authorized to use that dialing prefix to offer cut-rate service until the constraints on long-distance competition are further loosened in January. French regulators are considering leveling a fine against France Telecom, which would be equal to 3% of the company’s last year earnings, or $795 million. Neither France Telecom nor the regulator’s office would comment.
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