WorldCom buys TCL Telecom

Worldcom, the giant US telecommunications group, has bought out TCL Telecom, an Irish telecommunications company which supplies services to the corporate sector. The price, which has not been disclosed, may value the company at more than £20 million.

The company's main shareholders are Mr Sean Melly, TCL's founder and chief executive, who holds 40 per cent; well-known accountant Mr Bernard Somers, who owns 20 per cent; and businessman Mr Liam Booth, who holds 10 per cent. The remaining 30 per cent is already held by WorldCom.

Assuming a value of around £24 million, this means WorldCom paid £16.8 million to buy out the 70 per cent it did not own. Mr Melly stands to gain around £6.7 million, Mr Somers receives £3.36 million and Mr Booth gets £1.68 million.

TCL Telecom was founded in 1994 and has offices and switching centres in Dublin, Cork and Limerick. Along with companies such as Esat Telecom and other independent operators, it competes against Telecom Eireann in the business sector by providing international and long-distance telecommunications services.

In January 1996, it formed a strategic alliance with WorldCom, which acquired a 30 per cent shareholding in the company. WorldCom is currently bidding $30 billion (£20.5 billion) for MCI.

MCI was to join British Telecom in the largest takeover ever seen in the telecommunications sector. However, WorldCom stepped into the fray last week. Mr Melly, who formerly worked with Citicorp and First City as well as Emmett plc in New York, will remain on for two years. The existing management structure will also remain in place.

Mr Melly declined to disclose the purchase price. It is understood that TCL will have revenues of around £8 million£9 million this year. It forecasts revenues of twice this figure next year. The company says it has 700 corporate clients and this year will do around 50 million minutes of telecommunications traffic. Like other companies, around 50 per cent of this goes to Britain, with 20 per cent going through the US and the remainder through Europe and elsewhere.

TCL clients include Goodbody Stockbrokers, Ulster Bank Markets, Bank of Ireland and Barclays as well as Reuters.

Industry analysts said the value of TCL could vary between £15 million and £25 million. They said companies such as TCL would be valued at around three times annual revenues. Mr Melly said yesterday that the buy-out would greatly strengthen the company and it would help it to offer a far greater range of services "at better quality and higher speed".

He said these services would include Internet services and other data. He said that currently 80 per cent of telecommunications traffic comprises voice while 20 per cent comprises data. "This situation is expected to be reversed in five years," he said, "and we will be well-positioned to exploit that."

The great advantage for TCL was that it could now access a global network at cost. "It also gives us a long-term protection and business presence here in Ireland," he said.

TCL recently announced the construction of a fibre optic network in Dublin. The first phase of the £10 million, 25-kilometre project is now complete and links the IFSC to the company's Dublin switching centre.

WorldCom operates in more than 50 countries and its shares trade on the Nasdaq. It is the fourth largest long-distance operator in the US. It has expanded rapidly through acquisition into local services, particularly for the financial community and the Internet.