TELECOM ITALIA AND CABLE & WIRELESS ENTER PARTNERSHIP

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Signaling the beginning of a global partnership, Telecom Italia said it will pay $2 billion for minority interests in Cable & Wireless plc’s international businesses.

“I am pleased to welcome Telecom Italia as our global partner in building scale in our international operations,” said Richard Brown, chief executive of Cable & Wireless. “Telecom Italia is our anchor partner in continental Europe, expanding from our base of Cable & Wireless Communications in the U.K. This also brings us important access to Latin America.”

The announcement may be a setback for AT&T Corp., which last July signed a memorandum of understanding with Telecom Italia to form a global strategic alliance to serve international telecommunications customers, with a primary focus on Latin America and European regions, where AT&T has been trying to increase its presence. Telecom Italia’s agreement with Cable & Wireless essentially covers Latin America and Europe. Telecom Italia said talks are still on with AT&T, but terms of the MOU will be changed. AT&T declined to comment.

“We made an alliance in July with AT&T, but now we must change the alliance agreement,” said a Telecom Italia spokesman. “AT&T will be an alliance to work together in specific areas.”

“AT&T is such an important operator, and we’re still interested in having a link-up with them,” indicated another Telecom Italia spokeswoman.

As part of their agreement, Cable & Wireless has agreed to sell to Telecom Italia up to 20 percent of Cable & Wireless West Indies Ltd., 5 percent of Cable & Wireless Inc. in North America, and its 20-percent interest in French mobile operator Bouygues Telecom. These transactions will result in a cash injection to Cable & Wireless in excess of $2 billion.

At a later date, Telecom Italia has agreed to integrate its 29-percent interest in the Cuban telephone company, Etecsa, into Cable & Wireless West Indies Ltd. to leverage operating synergies with Cable & Wireless’ assets in the Caribbean, and Telecom Italia’s assets in South America.

Both companies also will invest in a joint-operating company, optimizing the investment in the two companies’ global networks and services to multinational customers. Cable & Wireless said the combined traffic carried by Cable & Wireless and Telecom Italia is more than 17 billion minutes per year, making this new partnership the second-largest international carrier in the world behind AT&T.

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