British Telecom Balks At Paying $23 Billion For Mci Phone Giants Continue Haggling As Fcc Approves Deal

British Telecommunications PLC on Thursday rattled Wall Street by seeking a cheaper price for mega-merger partner MCI Communications Corp., sending MCI’s stock price into a tailspin.

Even as the corporations haggled, Federal Communications Commission officials unanimously approved the deal to merge, eliminating the last major government barrier to a proposal valued last fall at nearly $21 billion.

U.S. regulators did not examine the financial terms. Approval was expected because MCI already pledged to regulators to promote competition in the merger partners’ markets.

And despite the fresh questions about the deal, analysts said it was more likely to be tweaked than killed, estimating British Telecom would demand up to 25 percent off the original asking price.

Plans to create a huge global telephone company, called Concert PLC, have been clouded ever since MCI, the No. 2 U.S. long-distance carrier, warned last month its local telephone operations would lose $800 million this year because of difficulty competing with regional phone companies.

British Telecom investors immediately began clamoring for a better price, and analysts predicted Thursday they can probably get one.

“It’s more important for MCI to get the deal done,” said Scott Wright, an industry analyst at Argus Research in New York.

“They’re probably going to be willing to stomach a lower price. I think BT would frankly be more likely to be the company that would walk away,” he said.

Still, the renegotiations were yet the latest fallout from the difficulty faced by MCI and other long-distance companies in breaking into regional phone markets in the United States. While the regional phone companies staunchly deny they are stifling competition, FCC officials have scolded them for not moving fast enough to open up their markets to new rivals.

MCI’s stock price tumbled and BT’s shot up as investors tried to guess the new asking price. MCI shares dropped 17 percent, or $6.12-1/2, to close at $30.56-1/4 on the Nasdaq Stock Market. British Telecom, meanwhile, jumped 7.6 percent to close at 412.5 pence ($6.60) per share on the London Stock Exchange. Its American depositary shares rose $4.37-1/2, or 7 percent, to $66.37-1/2 on the New York Stock Exchange.

Under the deal’s current terms, those stock prices would make the deal worth about $23.5 billion.

The telephone companies disclosed talks over price following erroneous reports in the United States that said price was not an issue in their current talks, according to a source familiar with the situation who spoke on condition of anonymity.

Although British Telecom and MCI said Thursday there was no guarantee about where their talks were heading, analysts figured the deal will go ahead with modifications.

“It may need some reworking, some tweaking, but there’s just too much benefit for either side to give up,” said Jeffrey Kagan, who runs a telecommunications consulting firm in Atlanta.

“However, with that said, it depends upon what BT is asking,” Kagan said. “MCI is not going to give away the store.”

Others were talking about substantially lower prices for the deal.

Daniel Reingold at Merrill Lynch in New York said the deal might go ahead at a price of 15 percent to 25 percent lower.