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16. Acquisitions and disposals (continued)
(p) 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.
At 31 March 1998, the group’s investment in MCI was stated at »813 million. Goodwill, amounting to »2,214 million written
o¡ to group reserves in prior years in respect of this investment, was accounted for at the completion of the MCI/WorldCom
merger in determining the pro¢t on the sale of the shares which the group recognised (see note 7).
17. Net debt
At
1 April
2000
£m
Cash flow
£m
Acquisition
or disposal
of subsidiary
undertakings
£m
Other
non-cash
changes
£m
Currency
movement
£m
At
31 March
2001
£m
Analysis of net debt
Cash in hand and at bank 253 159 – – – 412
Overnight deposits 41 (21) – – – 20
Bank overdrafts (138) (10) – – – (148)
156 128 – – – 284
Other current assets investments 2,010 480 48 16 (17) 2,537
Short-term investments and cash, less bank overdrafts 2,166 608 48 16 (17) 2,821
Debt due within one year, excluding bank overdrafts (5,512) (5,544) (62) (804) (66) (11,988)
Debt due after one year (5,354) (14,006) (34) 562 57 (18,775)
Total debt, excluding bank overdrafts (10,866) (19,550) (96) (242) (9) (30,763)
Net debt (8,700) (18,942) (48) (226) (26) (27,942)
2001
£m
2000
£m
1999
£m
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year 128 54 67
Cash (inflow) outflow from (increase) decrease in debt (19,550) (5,400) 632
Cash (inflow) outflow from (decrease) increase in liquid resources 480 (1,236) 2,447
Decrease (increase) in net debt resulting from cash flows (18,942) (6,582) 3,146
Currency and translation movements (26) (124) (2)
Debt assumed on acquisitions (48) (971) (94)
Other non-cash movements (226) (70) (26)
Decrease (increase) in net debt in the year (19,242) (7,747) 3,024
Net debt at 1 April (8,700) (953) (3,977)
Net debt at 31 March (27,942) (8,700) (953)
Notes to the financial statements
100 BT Annual report and Form 20-F