Broadcast 18th September 2000

	Listen to the report by Victoria Dale Jones

After a weekend of rumour, British Telecom finally confirmed that it has been holding talks with America's AT&T about "strengthening the scope of their relationship".

The former UK state utility and the number one US long distance phone provider, are already partners in a joint venture. But a number of newspapers have been speculating that this time they are discussing something far bigger - a merger of two of their biggest businesses, as Victoria Dale-Jones reports:



"Newspaper reports have centred on rumours that the two companies' chief executives and senior management met at a hotel near London's Heathrow Airport eleven days ago.

"There, it is claimed, they mapped out the basis for a merger of their mobile businesses, which could be followed by a partial float next year. It was also suggested that they were considering merging their business services operations into one high tech group.

"This could operate alongside Concert, their existing joint venture, which provides services to multinational companies or, as some analysts are suggesting, could be combined with Concert and spun off as a separately traded company.

"Eddie Murphy of Analysys, says these moves could enable both companies to shore up their defenses and compete head on with their rivals:

"They have both felt threatened by takeovers on a number of occasions recently and I think they would see this as a means of defending themselves. The logic behind this move is quite strong and will increase their ability to compete on the international markets."

A company like BT has a high level of debt and this could be seen as a move to reduce some of that indebtedness. Eddie Murphy

"AT&T is also saddled with debt and both companies have seen their share prices nearly halved this year.

"For most of the weekend, both BT and AT&T remained tight-lipped about the talks. BT even dismissed newspaper stories as "rumour and speculation", but later confirmed they had been holding a "strategic review" since April - the results of which would be announced later this year. It added that further plans, including potential stock market floats, would be revealed then."

BT dismissed newspaper stories as "rumour and speculation", but later confirmed they had been holding a "strategic review" since April. Victoria Dale-Jones