WASHINGTON-Telefonica, WorldCom Inc. and MCI Communications Corp. said they plan to partner in strategic business ventures to leverage the three companies’ network and geographic strengths as they enter new telecommunications markets in Europe and the Americas.
The agreement extends the terms of the Pan-American joint venture created by MCI and Telefonica last April, and allows Telefonica to take a minority equity interest in WorldCom’s existing and future European business. WorldCom and Telefonica plan to form a partnership, managed by 51-percent-interest partner WorldCom, to explore telecommunications opportunities in Eastern and Southern Europe.
“We have chosen the best partners to help broaden our reach in Europe, consolidate our market leadership in the Spanish-speaking world and move forward with new investment opportunities in Latin America, particularly in Brazil, which will be our principle focus during 1998,” said Telefonica Chairman and Chief Executive Officer Juan Villalonga.
Telefonica will have an option to acquire 10 percent of a new company WorldCom plans to establish to manage its current European operations. After the new company is formed, Telefonica also will have the right to purchase a sum total of 46 percent in WorldCom’s existing Italian operations.
WorldCom and MCI stockholders last week overwhelmingly approved the $37-billion merger of the two companies-the largest corporate merger in history-amidst opposition and expressed concern about layoffs from labor unions and civil rights leader Jesse Jackson. The companies expect regulatory approval and the completion of the planned merger by mid-1998.
MCI and Telefonica’s international unit, Telefonica Internacional SA (TISA) will operate in the Latin American market through their pan-American joint venture called Telefonica-Panamericana MCI (TPAM), which is managed by TISA. The venture is owned 51 percent by Telefonica and 49 percent by MCI, and that ownership arrangement will continue. As part of the overall agreement, MCI will have the option to acquire at least a 10-percent interest in TISA, based on the company’s value at the time the option is exercised.
