MCI Communications Corp. and Rupert Murdoch's News Corp. are teaming up to launch a worldwide entertainment and information service that will combine MCI's technological prowess with the creative flair of the Murdoch empire.
Under the agreement announced yesterday in Washington, MCI will invest up to $2 billion to become the largest outside shareowner in News Corp. The companies also will kick in $200 million each to launch the venture, but Mr. Murdoch and MCI Chairman Bert C. Roberts said that was just the beginning.
"We would both contemplate that within a year or two there will be very much more money involved," Mr. Murdoch said.
The joint venture combines the resources of two of the most successful upstarts in American business.
MCI, the nation's No. 2 long-distance company, emerged from obscurity in the 1970s to mount a legal challenge that eventually broke the back of the Bell system. Now it is taking aim at the lucrative local telephone market -- with Maryland as one of its first targets.
In the late 1980s, News Corp.'s Fox Broadcasting Co. crashed the cozy club of three networks that had dominated American broadcast television since its birth.
The details of what the joint venture would provide and to whom were left vague, but Mr. Roberts and Mr. Murdoch stressed the worldwide ambitions of the alliance. They noted that MCI has a working alliance with the British telecommunications giant BT, while News Corp. has extensive holdings in the satellite television industry in Europe and Asia.
"There is not one competitor with the global reach and scale of this alliance," said Mr. Roberts.
The combination of MCI's conduit and Mr. Murdoch's content is just the latest of a series of high-level joint ventures formed by telecommunications giants since the path of outright acquisition was blocked last year by the rubble of the ill-fated
merger of Bell Atlantic Corp. and Tele-Communications Inc.
Those include alliances of Sprint Corp. and three large cable companies to provide video, local telephone, long-distance and wireless services; Bell Atlantic and two other regional phone companies to produce video programming; and three other "Baby Bells" with the Walt Disney Corp. for the same purpose.
Mr. Roberts said he expected the MCI-Murdoch venture to compete with these other teams in many aspects of their business, but he said his company and its new partner bring more to the table than the previous alliances.
MCI's resources include a high-capacity long-distance network covering the United States, formidable marketing skills, vast experience in communications software and network management and a leading role in connecting businesses with the Internet. News Corp. will contribute the Fox Network and its 200-plus affiliates, the Twentieth Century Fox studio, the FX cable network, TV Guide magazine, HarperCollins Publishers and more than 130 newspapers in the United States, Britain and Australia.