US firms want pole position
LESS than two years ago, John Sculley, then chairman and chief executive of Apple Computers, provoked private jokes at his own expense at a telecommunications conference in Paris.
The cause of the mirth was Mr Sculley's speech to conference participants in which he predicted a convergence of telecommunications, computing, electronic, media, entertainment and education corporations to create a mega-industry that would be worth US$3.5 trillion by the year 2000.
No one is laughing now.
US corporations, which see themselves as future information superhighway players, are rushing to piece together the critical information and service network that will stretch from suppliers to consumers.
Many US regional telephone companies feel threatened by telecoms advances, as the same wires used by cable television or data companies can also be used to transmit conversations.
Robert Harris, managing director at Goldman Sachs in London, believes the fear of being left out in the cold has driven US regional telephone companies to merge or acquire cable-TV firms.
He said: ''If there are two wires in the home - one telephone and one cable, and both carry information - the wire used by consumers will be the one that provides the greatest access to programmes, as the same wire can also carry voice communications.'' Bette Massick, vice-president of SG Warburg in New York, believes the reasons for the shake-up in the US telecoms industry are also regulatory driven.
''Telephone companies in the US are forbidden by law to hold cable television licences in their geographical business areas,'' Ms Massick said.
''But the telephone and cable industries want to create a bigger 'footprint' - that is, make sure their services are available over as wide a geographical area as possible. Thus, they are starting to merge.'' The past seven months in the US has witnessed telecoms and entertainment alliances that analysts believe are the first tentative steps towards the creation of an information superhighway in America.
Probably the best known telecoms battles are the rival bids for Paramount Communications. The saga, now into its six month, has been a slugging match between two cable-TV powerhouses: Viacom and QVC Network.
The value of the two bids has already topped $10 billion and dragged in two telephone companies.
NYNEX, the New York State telephone company, has agreed to inject $1.2 billion into Viacom if its takeover of Paramount is successful, and half if it fails.
Bell South, a regional telecoms firm, has agreed to invest $1.5 billion if QVC wins in its bid for Paramount, and $500 million if it loses. Bell South also has an option to invest more in QVC.
Other telecoms mergers and takeovers include the Bell Atlantic's purchase of Telecommunications Inc, which previously bought Liberty Media, a cable-TV company. Liberty also has a stake in QVC.
Reports initially valued the deal at $44 billion, but Ms Massick says the merger will probably not be finalised until next year.
US West, another regional telephone company, paid $2.5 billion for a 25 per cent stake in Time Warner Entertainment, a unit of the publishing and recording giant Time Warner.
South West Bell, yet another cash-rich ''baby Bell'', paid $1.6 million to form a joint venture with Cox Cable.
The venture has said it will pursue other cable stations and expects several acquisitions to be completed within the next six months.