MCI Communications Corp. announced yesterday that it is buying RCA Global Communications Inc. from General Electric Co. for $160 million as part of an effort to strengthen its presence in the fast-growing international telecommunications market.
The acquisition will give MCI an estimated 40 percent of the international telex market, establishing the Washington-based firm as the world's leader in that segment. The deal will also augment MCI's position in the market of high-speed data transmission and electronic messaging services and help chip away at American Telephone & Telegraph Co.'s overwhelming dominance in international voice transmission.
"This is an opportunity to virtually double our position in telex and the leased-circuit business for data," said MCI Executive Vice President H. Brian Thompson. "Any time you can double your market share, have it make money, and increase your future prospects, you've got a winner."
Industry analysts say that international telecommunications presently generates about 7 percent of MCI's overall revenue. While that figure is not likely to change dramatically as a result of the RCA Global acquisition, MCI executives say they expect their international subsidiary will grow rapidly.
Last year, the international telecommunications market grew about 20 percent, much more rapidly than growth of the domestic industry, according to John Bain, an analyst at Shearson Lehman Bros.
MCI, which had estimated sales of $3.6 billion last year, is the nation's second-largest long-distance telephone company, behind AT&T.
RCA Global, headquartered in Piscataway, N.J., became a part of GE in June of last year when GE merged with RCA Corp., the firm's parent company.
In the area of voice transmission, by far the largest part of the international telecommunciations market, MCI trails far behind AT&T, with "less than 2 percent" of the business in that sector, according to Bain.
MCI is "eating very rapidly into AT&T's position in voice, while they're doing nothing in international data," said Thompson.
Several analysts said the purchase of RCA Global is a good move for MCI, even though most regard communication by telex as somewhat antiquated. Telex systems are relatively slow and transmit data electronically to distant points, where the information is then typed out on paper.
"Anybody that says telex is not going anywhere is being pretty myopic," said Thompson. "We are posturing ourselves to be ready with standard record transmission systems as well as high-speed data transmission. We want to be ready to provide customers the data service when they're ready to move with it."
MCI first staked out a position in the telex market in 1982 when it purchased Western Union International, a subsidiary of Western Union, for $192 million.
Analysts say RCA Global accounts for less than 1 percent of GE's overall revenue.
"It's a good little business, but it didn't fit with the rest of GE's operation," said GE spokesman Bruce Bunce. "We have other larger businesses where we would rather focus our efforts."
Although MCI suffered a $448 million loss last year, it has a "more than adequate amount of cash" for the deal, Tobin said.