Outlook: Telecom divorcees come hunting

IT'S NOT everyday that you see a herd of elephants charging your way. The normal response would be to take cover, but instead, the City, the British telecoms sector and the cable industry have decided to sit back and enjoy the spectacle. Two great elephants in particular are galloping in their direction - France Telecom and Deutsche Telekom.

The two of them used to be partners, but after a careless and ultimately fruitless fling by Deutsche with its Italian counterpart, they both find themselves acrimoniously divorced, alone and in need of alternatives. Britain, the most liberalised telecommunications market in the world, is the place they've chosen to come roaming.

Like most of the recently divorced, they don't seem to have the slightest clue about what they are after. Almost anything will do, judging by this week's bizarre $1bn investment by France Telecom in NTL. What does Michel Bon, France Telecom's otherwise reasonably considered chairman, think he is playing at? NTL is a Nasdaq listed, junk bond funded cable and media company run by an ambitious young American called Barclay Knapp. In his own way, he's quite a star but investing in him hardly seems to amount to much of a strategy for France Telecom.

If the UK cable industry is to consolidate, Mr Knapp wants to be top dog. He's tried once already to gatecrash Telewest's talks to buy Cable and Wireless's (CWC's) residential cable business, but was told it was too complicated to have a three way merger. Let Telewest and CWC do their deal first, he was told, then we might talk about taking in NTL as well. That clearly would have sorely tested Mr Knapp's plans to end up in pole position, so he's enlisted France Telecom to give him the fire power to mount his own bid for C&W's residential business.

This is great for CWC, which now has the prospect of an auction for its assets, and probably not bad news for Mr Knapp and his shareholders. But what's in it for France Telecom? A residential broadband telecoms business in one of the world's most competitive market places? This looks more like compulsive shopping than considered strategy.

The same is true of Deutsche, which seems to think overseas acquisition making is more important to its long term future than defeating the competition at home. For us Brits, there is a strange sense of deja vu about all this. Like British Telecom before them, these two recently privatised incumbents look set to discover the hard way that looking after the customer at home beats any amount of adventuring overseas.