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Monday, October 11, 1999 Published at 09:52 GMT 10:52 UK

Business: The Economy

Global telecoms revolution

From Japan to Germany, telecoms markets are opening up

Twenty years ago the idea of privatising the UK's telephone network seemed revolutionary.

Today, the idea is catching on all over the world.

And in another 20 years' time, the world of telecommunications will be vastly different again - thanks to a revolution in technology.

[ image: The UK was the first European country to liberalise its telecoms market]
The UK was the first European country to liberalise its telecoms market
A surge in use of the Internet, e-mails and electronic commerce have opened up new worlds of business for telecoms companies.

Mobile phones are considered a vital tool of the future - for the office and personal use.

Your phone will allow you to access your bank account and will be your computer and your fax.

And rising pressures on employees to do business on the move has spurred on the drive towards developing technology.

Only this week, BT and Microsoft announced plans for a trial of wireless Internet services on mobile phones.

Opening up to competition

Worldwide telecoms revenue is forecast to rise from about £650bn in 1996 to about £1.2trillion in 2002.

At the same time as technology is making rapid progress, markets everywhere are opening up to competition.

It's a mix that guarantees more companies muscling in on the market, and it forces established names to ensure they survive.

Typically they are doing so by keeping up with the pace of change and merging with rivals.

At the beginning of the 1990s, only about 20% of the world's telecommunications market was open to competition; by the start of the new millennium this figure will have risen to about 90% as state monopolies fall to the new trend.

It started in the UK, with BT, then spread to the US and now Europe and the Far East are joining in.

Global Alliances

The spread has opened up many more opportunities for large and small companies and a search by big players for company alliances worldwide to compete with newcomers.

Even companies such as Tesco, Virgin and British Gas want to offer cheap phone services, in tandem with telecom firms.

Last August, business telephone provider Energis acquired the UK's largest Internet provider, Planet Online - a crucial step in the company's plan to branch out into Web technology.

UK-based group Cable & Wireless has said it plans to expand more into Internet technology and has just launched an e-mail and Internet service through digital television sets in certain parts of the UK.

But probably the most significant deal recently is the alliance of BT with American giant AT&T.

The two companies are putting all their international operations into a separate entity, allowing customers to use mobile phones anywhere in the world.

The new venture, which has the go-ahead from the European Commission, will operate in more than 27 countries.

A number of other American phone firms have also undergone mergers, notably the Baby Bells, created by the break-up of AT&T.

New wave in Europe

Things are changing in Europe, too.

German engineering giant Mannesmann is hoping to cash in on the expanding markets by setting up its telecoms subsidiary as a separate company.

Analysts had expected the UK's leading mobile phone operator, Vodafone, to bid for Mannesmann, as merger fever spread.

Vodafone itself won a transatlantic bidding war in January to snap up US firm AirTouch Communications for £37bn, the biggest deal struck by a UK firm, creating Vodafone Airtouch.

Vodafone Chief Executive Chris Gent said at the time that the intention was to create "a Microsoft of mobile phones". The new company serves more than 24 million mobile customers on four continents.

And now, Vodafone Airtouch is negotiating a tie-up with Bell Atlantic, the biggest regional telephone company in the US. This move would create one of the world's biggest telecoms companies.

Meanwhile, Germany's old monopoly, Deutsche Telekom, had planned to merge with Telecom Italia in a bid to see off emerging competition - but the plan failed.

DeutscheTelekom has already acquired UK mobile phone operator One-2-One, but its hopes of expanding into the United States have also been been blocked, at least temporarily.

In May this year, Telecom Italia - Europe's fourth-largest phone firm - was itself the victim of a takeover by much smaller rival, Olivetti, who gained the support of TI's biggest institutional shareholders.

Another Deutsche Telekom merger plan also failed. Together with France Telecom, it had long been planning an alliance with US phones giant Sprint - but the idea was scuppered when Sprint teamed up with MCI WorldCom, in the world's largest ever corporate merger.

With each successive alliance, shares in telecoms companies worldwide have been booming.

Two decades ago, when a telephone company meant nothing but a state monopoly, no-one would have imagined such a thing.

And no doubt the shares surge will continue for some time, since the trend for tie-ups is by no means over yet.

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