Dialing Into Flying Phones

Where will the networkMCI plan take the No.2 long-distance company next? How about aloft? This month, MCI plans to announce a deal to pay more than $150 million for an unspecified stake in In-Flight Phone Corp., a private company providing air-to-ground phone service. "We need to get up in the skies, because that's where our customers are," says MCI President Gerald H. Taylor, who confirms the negotiations.

Analysts say the deal, which reunites In-Flight Chairman John D. Goeken with MCI, the company he founded in 1968, should benefit both sides. In-Flight, based in Oakbrook Terrace, Ill., needs a deep-pocketed backer that can boost its credibility with airlines. And MCI gets into a market that's expected to go from less than $100 million now to $1 billion by the year 2000.

The proposed deal has already paid off. In-Flight had been vying with McCaw Cellular Communications' Claircom unit to sign up Continental Airlines, which was wary of In-Flight's small size. MCI was hesitant to invest unless In-Flight landed a big customer. Finally, MCI agreed to buy the stock, and In-Flight got the contract for Continental's 360 planes.

In-Flight, whose phones are connected to screens for receiving services such as e-mail, has 1,000 planes under contract, compared with 1,700 for GTE Airfone Inc. and 1,485 for Claircom. But the business will be up for grabs when current contracts expire. That gives MCI's marketeers time to do their thing--Friends of Frequent Flyers, perhaps?

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