The quest for international partnerships continued last week as AT&T Corp. announced a $10 billion joint-venture plan with British Telecommunications plc to more strongly position itself in the global market.
AT&T and BT July 26 said they have agreed to pool their international operations and form a new company, yet to be named, to provide telecom services to multinational corporate clients.
“Today’s announcement is a key part of the overall facilities-based growth strategy AT&T has been aggressively rolling out since January,” said AT&T Chairman and CEO Michael Armstrong. “The moves we have made will enable our shareowners to benefit from growth opportunities in the local communications markets of the U.S., and now, in the exploding global market.”
The announcement follows recent moves by AT&T in the United States to position itself in domestic local markets. In June, AT&T announced its proposed $48 billion acquisition of cable TV giant Tele-Communications Inc. AT&T also has agreed to buy Teleport Communications Group Inc., which provides local-loop services to businesses.
The AT&T-BT venture will combine the trans-border assets and operations of each company, including their existing international networks, international traffic, international products for business customers, and both companies’ multinational accounts in certain industry sectors, according to AT&T and BT.
The companies said they plan to combine their trans-border network investment programs and adopt a new common network architecture for the venture. Based on Internet Protocol technology, the new platform initially would carry voice and data at rates of 200 gigabits per second and link 100 cites, according to the two companies.
They also have agreed to each invest $500 million in U.S. businesses involved in high technology and emerging communications markets.
While the joint venture would not include a direct wireless strategy, BT spokesman Jim Barron said the new company will serve as a carrier’s carrier for wireless companies in smaller markets that want to provide international services. “It will turn small wireless [companies] into global companies by simply enabling them to connect to [our] network.”
AT&T spokesman John Heath added that once the joint venture is approved, AT&T Wireless Services and AT&T Solutions, which offers network management services, would begin offering solutions for joint-venture clients. However, he was not specific on what those solutions would be.
Owned equally by the two companies, the joint-venture company is expected to garner revenues of more than $10 billion in its first full year of operation, with operating profits of about $1 billion, said AT&T and BT. To be based somewhere in the eastern United States, the venture will operate separately from its parent companies. BT Chairman Sir Iain Vallance has been named its first chairman. An internal and external search for a CEO currently is being conducted, said AT&T’s John Heath.
The agreement is subject to numerous approvals, including from the Federal Communications Commission and the Department of Justice in the United States, as well as the European Commission and United Kingdom’s Office of Telecommunications. The venture’s formation also is subject to the closing of the MCI-WorldCom merger because BT would have to buy MCI’s stake in the BT-MCI Concert alliance in order to incorporate that business into the AT&T-BT alliance.
The companies said they expect the AT&T-BT deal to close within 12 months.
As a result of this deal with BT, AT&T eventually would withdraw from two existing international partnerships: AT&T-Unisource Communications Services and WorldPartners. AT&T in 1994 formed a joint venture with Unisource NV, which includes a group of European carriers, to serve business customers in Europe. AT&T, with a 36-percent share, is the leading stakeholder in the WorldPartners alliance, which includes Kokusai Denshin Denwa of Japan, Singapore Telecom and Unisource, each with 18 percent, and Telstra Corp. Ltd. of Australia with 10 percent.
AT&T said it will exercise its right to exit the AT&T-Unisource alliance by July 2000 and that the WorldPartners alliance will not be extended beyond year-end 1999.
Being left out in the cold as a result of the AT&T-BT partnership, KDD in Japan told Reuters last Monday it would shortly begin discussions with AT&T and BT to join the new alliance. However, AT&T could not confirm this information. “We are talking to several distributors around the world, including our current international partners,” said AT&T’s Heath.
This quest for international partners illustrates that going it alone will not work in the long term in the increasingly competitive international market. BT had been looking for a partner since it lost to MCI in the international bidding war to purchase WorldCom Inc. MCI and BT had been partners.
