Washington, D.C.--March 9, 1998--
Telefónica, WorldCom and MCI announced today they will partner to
create strategic business ventures that will leverage the three
companies' network and geographic strengths as they enter new
telecommunications markets in Europe and the Americas. This agreement
builds upon the terms of the Pan American Joint Venture created by
MCI and Telefónica last April and allows for Telefónica to take a
minority equity position in WorldCom's current and future
European businesses. MCI will also have the option to take a minority
stake in Telefónica Internacional SA (TISA). WorldCom and MCI are
expected to complete their previously announced merger by mid-year
1998.
"We have chosen the best partners to help
broaden our reach in Europe, consolidate our market leadership in the
Spanish-speaking world and move forward with new investment
opportunities in Latin America, particularly in Brazil, which will be
our principle focus during 1998," said Telefónica Chairman and
CEO, Juan Villalonga.
"This agreement recognizes that
WorldCom's strategy to deliver high bandwidth end-to-end service
worldwide over its own facilities has proved powerful both to our
customers and shareholders," said Bernard J. Ebbers, WorldCom
president and CEO. "It also acknowledges Telefónica's and
MCI's strengths in meeting the increasing demand for global
connectivity for their multinational customers. As partners,
WorldCom, Telefónica, and MCI will be better able to enhance the
short and long term growth and value of the companies, given the
rapidly expanding global market opportunities."
Said Bert C. Roberts, Jr., MCI chairman, "The
partnering of WorldCom, Telefónica and MCI is a win for customers,
representing a strong group of industry visionaries -- each bringing
value through facilities, reach and product. Today's announcement
represents a new era of communications competition in both Europe and
the Americas -- two regions which account for 70 percent of the
global telecommunications market and are increasingly open for
competition. Together, we will utilize existing facilities and build
new networks in emerging markets to support the explosive growth of
communications services around the world."
Opportunities in Europe
Telefónica, the leading telecommunications
services provider in the Spanish-speaking world, will join
WorldCom's European business network as a distributor. Telefónica
also will have an option to acquire a 10 percent stake in a new
company that will be established to manage WorldCom's existing
European operations. In addition, Telefónica will have the right to
purchase an aggregate 46 percent in WorldCom's existing Italian
operations, after the creation of the European operations company.
WorldCom and Telefónica also will form a partnership to address
telecommunications opportunities in Eastern and Southern Europe. This
venture, to be managed by WorldCom, will be 51 percent owned by
WorldCom and 49 percent by Telefónica. WorldCom International
currently provides telecommunications services on its own facilities
throughout Europe including Belgium, Germany, France, Italy, Ireland,
Netherlands, Sweden, Switzerland and the United Kingdom.
Latin American Ventures
Telefónica Internacional SA (TISA),
Telefónica's international unit, and MCI will operate in the
fast-growing Latin American communications market through their Pan
American joint venture, called Telefónica-Panamericana MCI (TPAM),
which is managed by TISA. Going forward, this venture will be owned
51 percent and 49 percent by Telefónica and MCI respectively. The
Latin American telecommunications market for all services is
currently valued at over US$50 billion and is projected to grow to
over US$67 billion by 2000.
TPAM plans to build a state-of-the-art,
all-digital network to link major business centers throughout Latin
America. The network, which will consist of high-speed fiber optic
cables and sophisticated switching equipment, will be designed to
carry vast amounts of data and voice traffic. The TPAM network will
be constructed in phases, based on customer demand as well as
regulatory and business issues. By the year 2001, the network is
expected to connect nearly a dozen business centers in Latin America
with gateway connections to MCI, WorldCom and Telefónica facilities
in North America, Europe and other parts of the world.
As part of the overall agreement, MCI will have
the option to acquire at least a 10 percent stake in TISA, based on
the value of the company at the time the option is exercised. TISA,
the leading telecommunications provider in Latin America, currently
operates communications companies in Argentina, Brazil, Chile, Peru
and Puerto Rico and has holdings in other Latin American countries as
well as in the U.S. During 1998 TISA and its partners will seek to
expand its leadership role in the region by taking part in the
privatization process in Brazil. MCI, with a presence in 17 countries
in Latin America, is the second largest provider of international
voice traffic and a major provider of international private lines
between the U.S. and Latin America.
MCI and Telefónica also reaffirmed their
commitment to provide systems outsourcing and integration services to
business and government customers throughout Latin America. These
activities will be pursued by 50/50 joint ventures between TISA and
MCI Systemhouse, MCI's systems integration company.
New Venture Aimed at U.S. and
International Hispanic Market
MCI and Telefónica will create a 70 percent-30
percent new joint venture, managed by MCI, to provide customized
products, promotions, marketing and customer service programs
targeting the U.S. Hispanic consumer and small business markets as
well as the international Hispanic market. The Hispanic market in the
U.S. is the fastest-growing demographic segment, estimated at over 29
million people. The Hispanic telecom market roughly represents 8
percent of the total U.S. long distance market, valued at $93
billion.
Subject to regulatory approvals, TISA and MCI will
merge their existing activities in Puerto Rico and make it part of
the TPAM joint venture.
Board Representation
Juan Villalonga, chairman and CEO of Telefónica
will join the WorldCom board after the pending merger is closed and
Bert Roberts, chairman designate of WorldCom will join the Telefónica
board.
Portugal Telecom
Also, Telefónica, MCI and WorldCom have agreed
with Portugal Telecom that the four parties will initiate detailed
discussions aimed at including Portugal Telecom into the various
business plans announced by Telefónica, MCI and WorldCom today. The
focus of these arrangements will be to complement the parties'
existing activities.
Telefónica is among the world's top ten
telecommunications companies and the largest provider of telecoms
services in the Spanish-speaking world. Through a network of
affiliate companies in Spain and Latin America, Telefónica reaches a
market of more than 300 million people. Telefónica, which was
completely privatized in February 1997, is Spain's largest
company, with 1997 annual revenues of $15.577 billion.
MCI is a leading provider of local-to-global
communication services to business, government and residential users.
The company's fast-growing portfolio of advanced data and IT
services now accounts for nearly a quarter of MCI's $19.7 billion
in annual revenue. MCI, with offices in over 65 countries, operates
one of the world's largest and most advanced digital networks,
connecting local markets in the U.S. to more than 280 countries and
locations worldwide.
WorldCom is a global telecommunications company,
with 1997 annual revenues of $7.35 billion. Operating in more than 50
countries, the company is a premier provider of facilities-based and
fully integrated local, long distance, and international voice and
data services. WorldCom's subsidiary, UUNET Technologies, Inc.,
is an international provider of Internet services throughout the
United States as well as in Canada, Europe and the Asia-Pacific
region. WorldCom and MCI announced a definitive agreement to form a
new company called MCI WorldCom. The new company will be uniquely
positioned in the U.S. local and long distance markets as well as the
global voice and data markets.
