BT 2000 Annual Report Download - page 82

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(g) Airtel Movil
Following the clearance in 1998 by the European Commission of the alliance between the company, AirTouch and other
investors in Airtel Movil SA, a leading Spanish mobile telecommunications company, the group's 15.8% investment in
Airtel was reclassi¢ed as a joint venture on 1 April 1998. Airtel is jointly controlled by the company as a consequence of
the alliance agreement. During the year ended 31 March 1999, the group acquired an additional 2% interest in Airtel for
»55 million.
In summary, the acquisition of the cumulative 17.8% interest in Airtel comprised:
£m
Group share of original book value of net assets 62
Fair value adjustment to achieve consistency of accounting policies (19)
Fair value to the group 43
Goodwill 158
Total cost 201
(h) Cegetel
On 24 September 1997, the group completed its acquisition of a 26% interest in Cegetel, a leading French
telecommunications company. Of the cost of the investment in the associated undertaking of »1,029 million, goodwill
arising of »862 million was written o¡ against reserves.
The acquisition of the interest in Cegetel comprised:
£m
Group share of original book value of net assets 483
Fair value adjustment to achieve consistency of accounting policies (316)
Fair value to the group 167
Goodwill 862
Total cost 1,029
(i) MCI Communications Corporation
In September 1994, the company completed the acquisition of a 20% equity interest in MCI (a major carrier of long-distance
telecommunications services in the United States) represented by a holding of 136 million unlisted Class A common shares,
whereupon MCI became the group's most signi¢cant associate. On 3 November 1996, the company entered into a merger
agreement with MCI whereby the group would acquire the entire share capital of MCI, not already owned. On 21 August
1997, the terms of the merger agreement were modi¢ed. On 1 October 1997, WorldCom announced its intention to o¡er
shares in its company to MCI shareholders as an alternative to the proposed merger and, following an improved o¡er from
WorldCom on 9 November 1997, the company agreed with WorldCom and MCI that it would support the proposed merger
of MCI with WorldCom. On 15 September 1998, MCI and WorldCom merged to form MCI WorldCom.
On completion of the merger, the company sold the group's holding of 136 million unlisted Class A common shares in
MCI to WorldCom for US$51 per share in cash. The consideration of US$6,936 million was equivalent to »4,133 million at
the exchange rate ruling on 15 September 1998. The group also held 0.7 million listed common shares in MCI, most of
which were purchased in November 1995. These shares were exchanged for MCI WorldCom common shares on completion
of the merger and subsequently sold in the market for »26 million.
As a consequence of the termination of the company's merger agreement with MCI and the company's agreement with
WorldCom and MCI, the group ceased treating MCI as an associate on 31 October 1997. The group's share of its associates'
results for the year ended 31 March 1998 included a loss before tax of »27 million for its share of MCI's results up to
that date.
Annual report and Form 20-F 81