TELECOMMUNICATIONS group Cable and Wireless appeared set to abandon its alliance with two German utilities yesterday, a move analysts said could shift the balance of power in Europe's biggest telecoms market.
C&W's departure from the alliance would weaken the position of Veba AG and RWE AG on the German telecoms market less than 12 months before markets are fully opened and competition to monopoly Deutsche Telekom is set to begin in earnest.
Officials close to the German utilities said senior executives of C&W, Veba and RWE were meeting in Germany, but the companies would not confirm a meeting was taking place.
C&W and Veba formed a strategic alliance in 1995, with Veba taking a 10.5 per cent stake in the British telecoms group and C&W taking 45 per cent of a joint venture called Vebacom GmbH.
Last year, the two companies agreed to bring RWE on board and after months of negotiations drew up the final contracts two weeks ago but C&W has declined to sign them.
There are several international ventures competing for the business of global telecoms enterprises.
The main venture's are the Concert merger of British Telecom and MCI of the US, the Global One venture of France Telecom, Deutsche Telekom and Sprint, AT&T led World Partners and Europe's Unisource NV.
Should C&W bale out of the Vebacom alliance, it would weaken the competitive position of Veba and RWE on the German telecoms market, not only in relation to Deutsche Telekom but also to other newcomers like Mannesmann.
Mannesmann is Germany's leading cellular phone operator, and is the industrial leader in the Arcor group that includes the German railway, AT&T, Deutsche Bank and Unisource NV.
"This would mean a considerable delay for Veba and RWE. Mannesmann is already positioned in the market, which means it can do business," said BHF Bank analyst Mr Hermann Reith.
Veba and RWE have said they would continue to build their alliance, but the departure of C&W would leave them without international services and products to offer, which is becoming increasingly important.
