BT Trims 20% Off MCI Price

Hammering out new terms to merge, British Telecommunications on Friday shaved about 20% off its price for MCI Communications Corp. to compensate for MCI’s expensive bid to break into the local phone market.

The renegotiated price of $18.9 billion, based on Friday’s stock market close, caps two up-and-down days of tense renegotiations between the telecommunications titans. The surprise talks came nearly 10 months after British Telecom and MCI agreed to create a global industry powerhouse, called Concert, with $42 billion in revenue.

But the deal seemed to create more dissonance than harmony.

Last month, the terms were called into question when MCI disclosed that its effort to break into the local telephone business would lose $800 million this year, and blamed what it called anti-competitive practices by regional phone companies.

British Telecom shareholders demanded a cheaper price, and the London company immediately called for another look at their deal.

The companies say they have a transaction that will be good for shareholders of both companies and shows they can work together in difficult situations.

“We’ve survived the jolt and moved forward,” British Telecom Chief Executive Peter Bonfield said.

Since BT will buy MCI for a combination of shares and cash, the price will fluctuate according to the stock market. They hope to complete the deal by year-end.

The original deal was worth about $21 billion when announced in November, but under those same terms the deal would have cost BT more than $23 billion had the sale gone through unchanged.

Investors applauded the new package. BT’s American depositary receipts rose $1.81 to close at $68.19 on the New York Stock Exchange.

Shares of Washington-based MCI fell 63 cents to close at $29.94 on Nasdaq, on top of a 17% plunge Thursday when the companies disclosed they were renegotiating.

The new terms will leave MCI shareholders with 25% of the merged company, compared with 33% under the first deal.

But MCI President Tim Price said he was happy and eager to close the transaction.

“We came down in price--or restructured the deal--so this would be a win-win arrangement for both companies,” Price told reporters.

British Telecom and MCI shareholders must approve the deal, but U.S. regulators have already given their blessing.