Sunday Business, 5th August 2001
By Robert Bailhache
EARTHLEASE, the Babcock & Brown-led consortium that approached British Telecom about buying its local phone-line network for £8bn, is seeking an independent operator’s licence from the regulator, Oftel.
Industry sources say the buyout vehicle’s senior executives met Oftel officials last week to hold preliminary talks about their offer. They also spelled out their desire to secure a licence and their qualifications for operating the local loop.
However, it is understood that Earthlease still hopes it can negotiate the right to lease the wires that run between local telephone exchanges and British households and businesses by reaching an agreement with BT.
An industry source said: “Earthlease have put the ball in motion at Oftel to get an independent operating licence. But they’re keeping the door ajar to give BT the chance of talking through the options properly. They’re not going to walk away.”
Last Monday, BT rebuffed the Earthlease proposal, which leaked out over the weekend, claiming it made no commercial or strategic sense for the company to consider the offer. Earthlease originally approached BT in June.
Sir Christopher Bland, BT chairman, is thought to have reiterated the company’s position that the deal is wholly unattractive in private correspondence with Babcock & Brown’s Nicholas Lethbridge last week.
BT sees the local loop as an asset that is core to its business of providing voice and data communication services. It also argues that Earthlease has no track record of operating a network, and that the firm lacks regulatory support for its bid.
But John Allen chairman of ARC Associates, a telecoms consultancy, said: “Oftel would be in favour of any proposal that breaks BT’s hold. It would be in the interest of a third-party operator of the loop to give simpler access to all carriers.”
It emerged yesterday that Earthlease has received expressions of support from some of BT’s biggest domestic competitors. Among these are operators Colt Telecom, Energis, Kingston Communications and Thus.
According to industry sources, at least two independent network operators have indicated they are willing to submit evidence to Oftel to back up their claim that a third-party operator of the loop would boost competition.
One spokesman for a smaller carrier said: “Anything that speeds up the unbundling of the local loop would be a good thing. Rival providers have been frustrated all the way in trying to get bandwidth to develop broadband services.”
Another network operator said: “We’ve spoken with Earthlease. It’s an intriguing concept, but we need to understand more about how it would work. We’ll make our position known, to Oftel if needed, once we’ve agreed our degree of support.”
Reproduced from Sunday Business
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