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Date: Wednesday, June 14, 2000, 9:32 AM -0400
From: Faulkner Telecom Weekly <telweekly@faulknerinfo.com>
To: ???
Subject: Faulkner Telecom Weekly - Newsletter

Telecom Weekly

June 5, - June 9, 2000 

Top Story of the Week

FCC Approves AT&T-MediaOne Merger (06/06/2000) 
After eleven months of reviewing the deal, the FCC approved the acquisition
of MediaOne by AT&T contingent on the companies divesting certain cable
assets. AT&T, the nation's largest long distance carrier, is now also the
nation's top cable provider. AT&T now has until May 19, 2001, to sell its
Liberty Media holdings; divest its stake in  Time Warner Entertainment; or
get rid of more than 9.7 million of its cable subscribers. One of the
aforementioned divestitures will be necessary to bring AT&T in line with
the FCC's rules prohibiting one company from controlling more than 30
percent of the multichannel video market, which includes cable and
satellite. Of the three options, AT&T is least likely to divest almost 10
million cable subscribers, or one-third of its cable subscriber base,
because of the potential revenue associated with each subscriber. The
second option, shedding its Liberty Media holdings, could trigger hefty tax
penalties if it is sold before the spring of 2001. AT&T General Counsel Jim
Cicconi stated that the company has no intention of getting rid of Liberty
holdings. The last option presented by the FCC, selling off the company's
stake in Time Warner Entertainment, seems to be the most likely solution,
according to industry analysts, considering TW has been trying to buy-back
the stake for three years. Also, the TW stakes are less valuable to AT&T
since they are owned by another company. AT&T has six months to decide how
it will reduce its ownership interests from 42 percent to 30 percent. AT&T
already agreed to shed MediaOne's interest in Road Runner by December 31,
2001, to secure approval from the US Department of Justice. 






Acquisitions, Mergers, and Divestitures
ADC to Acquire Centigram (06/09/2000) 
Centigram will file a proxy statement with the SEC in connection with the
proposed merger between Centigram and ADC. The companies reached an
agreement for the cash acquisition of Centigram by ADC valued at
approximately $200 million. The transaction is expected to close during the
next few months, subject to the approval of Centigram's shareholders. 

Mitel Buys Vertex (06/08/2000) 
Mitel purchased network chip developer Vertex Networks in a $300 million
stock deal. Mitel hopes the purchase will accelerate its drive into the
Internet market. 

Iridium in Court over Bid (06/08/2000) 
Iridium's lawyers petitioned the US Bankruptcy Court for the Southern
District of New York to accept the $50 million bid from Castle Harlan,
stating that it was the better option as compared to burning the satellites
in the Earth's atmosphere. 

BCI, Telmex Team up in Latin American Venture (06/08/2000) 
Bell Canada International and Telmex agreed to form a joint venture that
will provide telecommunications services to customers in Latin America. The
50/50 venture will comprise BCI's South American assets, Telmex's Brazilian
operations, and a combined $1.8 in cash. The two partners also are
considering bringing SBC Communications into the deal by allowing it to
fold its Latin American assets into the venture in exchange for a
25-percent stake. The RBOC said it will decide on its participation by the
end of July. Once operational, the yet-to-be-named company will provide
wireless, broadband, and Internet services over networks it will deploy in
Venezuela, Colombia, and Brazil. 

Telenor and BPA to Merge Service and Installation Biz (06/08/2000) 
Telenor and Swedish firm BPA said they will merge their service and
installation operations. The two partners will each hold 48 percent of the
new company, and management will own the remaining four percent. The
company, which will be called Bravida after Telenor's existing installation
and service arm, will employ 13,000 personnel and will have estimated
annual revenues of $1.5 billion. 

WorldCom Holding onto UUNET (06/08/2000) 
At a conference in New York, MCI WorldCom vice chairman John Sidgmore
reiterated that the company would cancel its planned acquisition of Sprint
if it is forced to shed its UUNET Internet unit. WorldCom representatives
have been meeting with Justice Department officials in recent weeks to
determine what concessions must be met to ease the competitive concerns
surrounding the merger. Sidgmore said that the companies are considering
other possible remedies; but shedding UUNET, which the company considers to
be the centerpiece of its growth strategy, is not an option. Sprint and
WorldCom already agreed to divest Sprint's Internet operations in addition
to some long distance telephone assets. Both companies have said that the
merger will be called off if too many conditions are placed on the deal. 

Liberty Media Closes IDT Deal (06/08/2000) 
Liberty Media, the cable programming arm of AT&T, completed the purchase of
a 9.9 percent stake in IDT. IDT is the controlling shareholder of
Net2Phone, in which AT&T has a controlling interest. Liberty Media will
nominate a director for election to IDT's board. In related news, the
regulatory waiting period expired regarding IDT's proposed sale of 14.9
million of its shares of Net2Phone to a consortium led by AT&T. 

EU Delays Ruling in AOL-Time Warner (06/07/2000) 
The European Union will decide by June 19, whether to launch a full-scale
probe into America Online's proposed $127 billion acquisition of Time
Warner. A decision was expected this week; however, the agency postponed it
ruling to consider concessions the firms offered to address competition
concerns. If the EU does not rule on the case by June 19, it will initiate
a four-month investigation of the deal. 

Telefonica to Acquire mediaWays for $1.6 Billion (06/07/2000) 
Telefonica agreed to acquire mediaWays, an Internet and data services
division of Bertelsmann, for $1.6 billion in stock. Bertelsmann will
receive shares in Telefonica Data if that unit launches its IPO by the end
of 2001. If not, the German media company will receive shares in
Telefonica. When the acquisition is complete, mediaWays will be folded into
Telefonica Data. This sale is the latest piece in a growing relationship
between Telefonica and Bertelsmann. Bertelsmann recently was awarded a
five-year, $1-billion contract by Telefonica to provide Spanish content for
Terra Networks and Lycos. 

Deutsche Telekom Has Full Coffers for Acquisitions (06/07/2000) 
Deutsche Telekom announced that is has 100 billion euros set aside for
acquisitions, and it said that T-Online, its Internet subsidiary, had 16.7
billion euros earmarked for the same purpose. The company said it could
spend as much as 25 billion euros on third-generation licenses. 

France Telecom to Sell Shares in Crown Castle (06/07/2000) 
France Telecom unveiled plans to divest 24.9 million shares in Crown Castle
International through a $693-million public offering. FT will sell its
remaining stake in the company to financial firms 30 days after the public
offering is completed. 

RCN Secures Fiber Capacity from FirstWorld (06/07/2000) 
RCN acquired excess rights along a fiber network owned by FirstWorld
Communications in the Portland, OR area. FirstWorld will retain enough
bandwidth on the network to maintain and grow its own services. 

Sycamore to Acquire Sirocco for $2.9 Billion (06/06/2000) 
Sycamore Networks agreed to purchase startup Sirocco Systems for
approximately $2.9 billion in stock. Sirocco produces hardware that links
existing telecom switches and lines to optical switches. The deal is
expected to be completed by the first quarter of 2001. 

AT&T Canada Buys DMC (06/05/2000) 
AT&T Canada acquired DMC, a provider of Web applications and e-commerce,
Internet, and intranet solutions to businesses, for 769,200 shares of Class
B Non-Voting stock as well as C$50 million in cash. DMC now operates as a
division of AT&T Canada's Internet and e-Business Services division. 

Orange to Bid for Sonera, KPN Mobile? (06/05/2000) 
Orange, the wireless company recently acquired by France Telecom, is
rumored to be considering launching a bid to acquire Sonera and KPN Mobile,
two companies that expressed interest in acquiring Orange when it was
divested by Vodafone AirTouch, said the Sunday Business. The UK company
will reportedly launch a 12 billion-pound bid on Sonera first, gaining
access to Turkish, Baltic, and Scandinavian markets. Then, Orange would
secure KPN Mobile, which has a presence in the Netherlands as well as parts
of Asia. If this deal goes through, which seems unlikely since KPN Telecom
recently formed a major alliance with NTT DoCoMo, it would form a wireless
company that could give telecom powerhouse Vodafone AirTouch a run for its
money. 






Alliances and Joint Ventures
Ericsson, ITC DeltaCom Will Boost Backbone Bandwidth (06/09/2000) 
ITC DeltaCom and Ericsson entered an agreement under which Ericsson's ERION
Linear system will be used to manage the integrated telco providers growing
bandwidth requirements and to address issues of future capacity. ERION
Linear is based on DWDM technology and is expected to increase ITC
DeltaCom's network capacity by approximately 128. The addition will span
six major cities in Texas and will initially run Synchronous Optical
Network (SONET) traffic over DWDM. Later migration of this traffic to IP
and ATM over DWDM will be provided as DeltaCom's needs evolve. 

BellSouth to Host E-Facturing Internet Engine (06/09/2000) 
BellSouth and yuSave.com will partner to launch and host a virtual,
Internet-based, data-rich direct marketing engine. Via this new Internet
portal, manufacturers -- over 700 to date -- will offer a wide variety of
goods and establish relationships with customers with minimal expense.
Manufacturers receive up to 90 percent of all sales revenue with no
up-front costs and will pay only a small transaction fee after a product is
sold. Immediate payment upon shipment insulates them from the long payment
cycles associated with traditional distribution channels. 

QUALCOMM Researching in China (06/08/2000) 
QUALCOMM signed research pacts allowing Chinese telecommunications
companies to license its CDMA technology to develop handsets and other
equipment. In addition to the licenses, QUALCOMM is supplying chipsets and
software. 

Global Crossing, Dacom Team Up (06/08/2000) 
In line with the company's expansion initiative, Global Crossing teamed up
with Dacom to bring Asia Global Crossing's undersea cable system to a
landing station in Korea. In addition, the companies will pursue Internet
business and e-commerce opportunities and Dacom will purchase capacity on
Asia Global Crossing's systems. The companies will work to land East Asia
Crossing in a cable landing station in TaeAn to connect to Asia Global
Crossing systems. East Asia Crossing is expected to connect in Korea in
June 2001. 

Industry Leaders Forge Agreement (06/07/2000) 
Excite@Home and Cox Communications unveiled an agreement to provide
Internet access and Web portal services for Cox's trial of interactive
television services in San Diego. Cox will work with Excite@Home to deliver
their latest broadband and digital cable services to Cox customers. Trial
participants will be able to access an array of information, including
news, weather, and stock quotes as well as e-mail and shopping. Trial
participants will also have access to Excite's personalized content,
applications, and services via their televisions with specially equipped
set-top boxes supplied by Cox. The trials are set to begin the second half
of this year. 

Arch and WirelessMD in Alliance (06/07/2000) 
Arch Communications formed an alliance to incorporate WirelessMD's medical
data retrieval application into its ReFLEX 25 network. The companies will
market the network to the medical community. WirelessMD's solution allows
medical professionals, using Motorola's PageWriter 2000, to access critical
patient information. 

Lucent and Ericsson in Bluetooth Agreement (06/07/2000) 
Lucent Technologies' Microelectronics Group and Ericsson Mobile
Communications are working together to develop Bluetooth technology using
Ericsson's architecture. The companies are collaborating to develop
Bluetooth system-on-a-chip technology. 

Telefonica, Microsoft Join for Wireless Web Trials (06/07/2000) 
Telefonica Moviles Espana--a unit of Telefonica and Microsoft--began
conducting joint trials of Spanish wireless Internet services. The two
companies expect to introduce the service to business and residential
customers in spring 2001. These trials are part of Telefonica's aggressive
push into the Spanish-language content arena. The company's Internet
division, Terra Networks, recently agreed to acquire Lycos, and it signed a
$1-billion deal with Bertelsmann for Spanish content. 

China Unicom Forms Alliance with Cisco (06/07/2000) 
China Unicom, the second-largest telecommunications carrier in China, and
Cisco Systems formed a two-year strategic alliance to develop telecom
services in China. The firms will develop technology for upgrading and
expanding service offerings. Both firms will participate in a joint
marketing effort for all China Unicom services that bear Cisco's CPN stamp. 

Microsoft Joins C&W/Compaq Alliance (06/07/2000) 
Microsoft agreed to provide a technology team to a joint venture between
Cable &Wireless and Compaq. The existing venture, in which the two
companies have invested a total of $500 million, provides rental of phone
lines, software, hardware, and support services to small- and mid-sized
businesses. In addition to Microsoft's team, the company also is providing
its Windows platform, which will be used in Compaq's iPAQ and in its
Internet-enabled wireless phones. 

Reuters and Equant Launch Joint Venture (06/07/2000) 
Reuters and Equant went live with Radianz, their joint venture that will
provide communications services over Equant's IP network to the financial
industry in 120 countries. Reuters owns 51 percent of the new company while
Equant holds a 49-percent share. Radianz is led by CEO Doug Gilstrap and
Chairman David Ure. Equant agreed to contribute 100 employees, $225 million
in cash, $125 million in services, and $15 million in annual contracts to
Radianz; and Reuters agreed to contribute more than 400 employees. 

FCC Line-Sharing Deadline Comes and Goes (06/07/2000) 
The FCC's deadline that the RBOCs and GTE negotiate region-wide
line-sharing agreements with CLECs by June 6 expired yesterday, and it
appears that the two groups of companies were able to negotiate deals on
time. Rhythms NetConnections, NorthPoint Communications, and Covad
Communications all reported that they secured line-sharing deals with the
RBOCs within their operating region, with only minor exceptions. Covad said
it is still hammering out details of its deal with GTE in Texas and with
SBC in all of its territories except California. 

BellSouth, NorthPoint Agree to Line-Sharing (06/07/2000) 
BellSouth will share its telephone lines throughout its nine-state region
with San Francisco-based broadband provider NorthPoint Communications.
Under terms of the agreement, BellSouth will provide NorthPoint with access
to the high-frequency portion of its lines. Until final rates are agreed
upon, NorthPoint will pay BellSouth interim rates for line-sharing as an
unbundled network element. 

BellSouth Wireless Works with Ericsson (06/06/2000) 
BellSouth Wireless and Ericsson expanded their relationship by installing
56 Ericsson AXC 627 Tigris Access in Servers, part of Ericsson's Integrated
Access System, into 28 Bell South Wireless' Mobile Switching Centers. This
agreement is part of BellSouth's TDMA infrastructure upgrade, which is
being performed by Ericsson. 

Sprint, Access Power Make Connection (06/05/2000) 
Sprint agreed to provide Access Power with a connection to its Internet and
voice network, including a network for Web-enabled calling, domestic
termination, international access, and global frame relay. Sprint will also
supply collocation services for Access Power's Internet and Web-based
calling equipment. 

QUALCOMM Signs CDMA License Pact (06/05/2000) 
QUALCOMM signed a license agreement with Garmin under which Garmin will
develop and sell CDMA subscriber products and HDR wireless applications
using QUALCOMM's technology. Garmin received a royalty-bearing license and
patents for global positioning technology belonging to QUALCOMM's SnapTrack
unit. 

Star TV and HKT Cancel Venture (06/05/2000) 
Star TV, a division of News Corp, and Cable &Wireless HKT cancelled their
joint venture. The alliance planned to offer pay television and Internet
services throughout Asia, but came under much stress after News Corp failed
in its bid to acquire HKT. 






Financial News
DT Files with the SEC (06/09/2000) 
Deutsche Telekom filed an application with the US SEC to sell up to $15
billion in debt securities. The company may sell securities from time to
time in one or more separate offerings in amounts, at prices, and on terms
to be determined at the time of the sale. 

US WEST to Sell Notes (06/05/2000) 
US WEST will sell $750 million to $1 billion of three-year notes by June 9,
2000. 

PageNet Releases First Quarter Results (06/05/2000) 
For the first quarter 2000, PageNet's revenues were $235.6 million, down
from $263.6 million in the same quarter in 1999. Net loss was $49.2
million, compared to a loss of $89.2 million. 

RCN Files to Sell $2 Billion in Stock, Warrants (06/05/2000) 
RCN filed with the SEC for approval to sell up to $2 billion in stock,
warrants, and debt securities. The company said the money it will generate
from these sales would go toward expanding its network, balancing operating
losses, and other corporate purposes. 






Regulatory News
Switzerland, Netherlands, Austria Prep for 3G Auction (06/08/2000) 
Telecom regulators in the Netherlands and Switzerland both announced that
10 telcos applied to take part in each country's upcoming third-generation
wireless auction. In Switzerland, the notable firms throwing their hats
into the ring include Telenor; Deutsche Telekom; Orange Communications, a
consortium comprising Orange and Viag; Sunrise Communications, a venture
between BT and Tele Danmark; Swisscom; NTL; Hutchison; and Team 3G, which
is a partnership between One.Tel, Sonera, and Telefonica. The Dutch
Ministry of Finance did not disclose which firms applied for entry into the
auction there, but it indicated that the companies which will be allowed to
participate will be announced July 3. In other news, the Austrian
government will award between four and six 3G licenses through an auction
in November. 

WorldCom to Pay $3.5 Mln in Slamming Fines (06/08/2000) 
The FCC fined MCI WorldCom $3.5 million for switching telephone customers
to its long distance service without permission. The agency received a
record 2900 complaints against the company in 1999 alone. MCI WorldCom is
reviewing all of the complaints and will refund all long distance charges
to any of the 2900 people it determines it slammed, according to the FCC.
To end the FCC slamming probe, WorldCom agreed to implement a new slamming
prevention program that incorporates financial penalties and disciplinary
action for those employees found slamming accounts. The company already
fired the sales representatives who perpetrated the prior incidents. 

FCC Looking to Connect More Indian Reservations (06/08/2000) 
The FCC approved a plan promoted by President Clinton to expand telephone
service on Indian reservations and decrease the cost of basic telephone
service to $1 a month. Currently, 96 percent of all Americans have
telephone service, but only between 20 percent and 45 percent of those
living on Indian reservations have telephone service. The new plan will
increase the federal Lifeline and Linkup programs funds by about $3 million
to $20 million. The funds are generated by fees charged to
telecommunications carriers that provide interstate and international
services, which are typically passed on to consumers. The commission is
also considering wireless and satellite technologies to bring service to
areas that do not have the infrastructure to provide traditional phone
service. 

France to Award 3G Licenses in Beauty Contest (06/07/2000) 
The French government officially announced that it will award four
third-generation (3G) wireless licenses through a "beauty contest" rather
than through a traditional auction like the one recently concluded in the
UK that raised more than $35 billion. Companies interested in securing one
of the licenses must submit an application to the government detailing why
they should be one of the carriers selected. The winning carriers will each
be charged $4.6 billion for a 15-year license. France Telecom and Vivendi
both released statements calling the price tag too high, but they both said
they will nonetheless submit applications. 

SBC Speeds DSL Rollout (06/07/2000) 
SBC Communications' $6 billion initiative dubbed "Project Pronto" aimed at
bringing DSL service to its 77 million customers is raising some issues
with the FCC. Essentially, the FCC must weigh two seemingly contradictory
mandates from the 1996 Telecommunications Act. Project Pronto would give
SBC and other carriers using similar technology a potentially monopolistic
advantage over companies who must use Bell networks to reach customers.
While this edge up for SBC clearly runs afoul of the mandate encouraging
competition, another mandate of the 1996 act was to encourage the FCC to
speed the deployment of DSL services. Project Pronto relies on thousands of
neighborhood cabinets, rather than central offices, as termination points
for individual customer's copper wires. Further, an SBC deployment of DSL
would seemingly run counter to SBC's earlier deal with the FCC that sealed
its acquisition of Ameritech. At that time SBC agreed to offer DSL only
through an affiliate that would be treated in exactly the same manner as
other DSL providers.

Minnesota Okays US WEST/Qwest Merger (06/07/2000) 
The Minnesota Public Utility Commission approved the proposed merger of US
WEST and Qwest after US WEST settled its differences with 12 interveners.
The one group with which US WEST had refused to mediate issues was the
14-state Association of US WEST retirees, who had objected to the merger
without safeguards for pension funds. In granting approval the agency
indicated that the merged companies must uphold commitments to retirees.
Meanwhile, the Association of US WEST retirees plans to join the national
Coalition for Retirement Security, an organization seeking to safeguard the
rights of retirees as mergers continue to reshuffle the corporate
landscape. Arizona is the only state left to rule on the merger. 

  

Comments or suggestions about Telecom Weekly may be sent to Tammy Boyle. 

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