||: AT&T and BT to Form $10 Billion Global Venture :||
[[All, The following news release concerning the jv-ing of ATT and British Telecom offers some interesting insights, since it spells out the underlying high regard that these bastions of conservatism now have for the Internet, both as a threat, and as an opportunity.
One can draw many inferences from this release. The unspoken message here, I believe, is that they will inevitably take the next step, albeit quietly at first, and migrate their platforms in the direction of VoIP on a selective basis, in order to, first, counter the effects of encroaching VON competition, and ultimately, to capitalize on its inherent benefits.
In one part of the release, under the heading of "future developments," below, this statement is made:
"Based on IP technology, the new platform will initially carry voice and data at rates of 200 gigabits per second and will link 100 cities."
Otherwise, the release appears to be very guarded and noncommittal on this topic, with regard to detail.
But even where they don't take the plunge into full-fledged VoIP immediately, their economies of scale and "synergies" can yield a very formidable obstacle, against which INTL-ITSPs must compete.
Assuming they take the plunge, would it suggest that there may now be a large- and tangible- enough prospect on the horizon to really test the solvency of international settlements and accounting rate practices? It would depend on how they enter the heretofore protected (VoIP) space, and just how they propose to do this remains to be seen.
Will they jump into the cloud? Or, will they suck the cloud into their own web of accounting intricacies?
What do you think?
Regards, Frank C.]]
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AT&T and BT to Form $10 Billion Global Venture To Serve Customers Around the World
NEW YORK, July 28 /PRNewswire/ -- AT&T (NYSE:T) and BT (NYSE:BTY) today announced they will create a $10 billion global venture to serve the complete communications needs of multinational companies and the international calling needs of individuals and businesses around the world. The venture will offer communications services of an unprecedented scale, scope and level of quality.
The venture will combine the trans-border assets and operations of each company, including their existing international networks, all of their international traffic, all of their international products for business customers -- including an expanding set of Concert services -- and AT&T and BT's multinational accounts in selected industry sectors.
Further, the two companies will develop an intelligent, managed Internet Protocol (IP)-based global network to be implemented by the venture, its parents and their partners. This network -- unparalleled in capabilities and reach -- will support services such as global electronic commerce, global call centers and new Internet-based solutions to support global organizations and executives on the move.
Owned equally by AT&T and BT, the venture in its first full year of operation is expected to have revenues of more than $10 billion, growing thereafter in excess of 15 percent a year. The venture is expected to contribute positively to the earnings of both parents from day one. Operating profits are expected to be around $1 billion in the venture's first full year, growing at 15 percent to 20 percent a year. Capital expenditures are expected to be around $1 billion.
Through the venture, AT&T and BT aim to be the undisputed leader in the fast-growing global communications services market. The venture, together with partners around the world, will provide an outstanding range of global services far greater than either AT&T or BT could provide alone or with their current alliances.
The venture will:
-- Offer customers the widest range of seamless advanced global products and services to meet their end-to-end communications needs;
-- Give customers unequalled levels of integrated service and support;
-- Carry trans-border traffic on a greater scale and more efficiently than ever before.
In a related but separate development, AT&T and BT have agreed to invest a total of $1 billion, split equally between them, in U.S. businesses involved in high technology and emerging communications markets.
BT Chairman Sir Iain Vallance said: "The creation of this new venture will be excellent news for our customers; they know that we can -- and will -- deliver. By positioning ourselves at the forefront of the global information age, we will maximize opportunities to grow revenues and enhance profits for our shareholders."
BT CEO Sir Peter Bonfield said: "With such a powerful partner, this new venture significantly builds on the world-leading position created by BT with Concert as it moves into the next generation of IP-based networks."
AT&T Chairman and CEO C. Michael Armstrong said: "Today's announcement is a key part of the overall 'facilities-based' growth strategy AT&T has been aggressively rolling out since January. 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."
AT&T President John D. Zeglis said: "The merging of our international assets to form this global venture will enable AT&T and BT to deliver in a unique and powerful way the seamless global services our multinational customers need and want."
The venture, which will be named later, will be free-standing with its own chief executive officer and management team. Its Board of Directors will include executives from both parent companies. Sir Iain Vallance will be the venture's first chairman.
With its operational headquarters in the eastern U.S., the venture will employ initially about 5,000 people worldwide. It will have its own sales force to serve directly corporate customers in selected industry sectors around the world.
The venture will stimulate competition in recently liberalized markets by supporting new competitive operators around the world. Many of them will be distributors for the new venture and all will be potential customers for its carrier services. All of this will accelerate efforts to bring accounting rates down, lowering prices, stimulating international calling and creating new businesses and new jobs.
Both companies expect that, while the regulatory approval process in Europe and the U.S. will be thorough, completion is achievable within about 12 months.
Financial Details
Both AT&T and BT will contribute significant revenues, profits and assets to the venture. In the year ending March 31, 1998, the businesses being contributed by BT, including its ownership interest in Concert, would have revenues of $2.3 billion ($2.1 billion after net outpayments on international direct dial) and operating profit of $300 million in the venture. The fixed assets attributable to the businesses were around $1.0 billion.
In the year ending December 31, 1997, the businesses being contributed by AT&T would have had revenues of $5.5 billion ($3.1 billion after net outpayments on international direct dial) and operating profit of $300 million in the venture. The fixed assets attributable to these businesses were $2.0 billion. The venture's operating profits are expected to increase by 15 percent to 20 percent a year, benefiting from increased sales and synergies such as shared capital expenditures and cost reductions.
For AT&T and BT shareholders, the creation of the joint venture is expected to lead to modest earnings accretion from the first full year and enhance both companies' long term-future growth.
AT&T and BT will account for their interests in the new venture as a joint venture with proportional consolidation of revenues and profits.
The Global Venture
The venture will have three key profit-generating businesses:
-- A Global Voice and Data business which will develop network-based communications solutions for multinational companies and institutions around the world.
The business will expand the current activities of Concert by combining it with other AT&T and BT businesses, which currently provide enhanced international voice and data services, such as international private line, frame relay, global software defined networks and value-added IP services. Its services will be sold by the venture, AT&T, BT and other distributors around the world. Its initial annual revenues are expected to be around $3.5 billion. It is expected to have an EBITDA of $1.0 billion and an EBIT of $0.5 billion, growing in excess of 25 percent a year.
-- A Global Sales & Services business which will directly serve all of the communications needs of multinational customers from selected industries.
-- initially targeting the financial, petroleum and information technology sectors. It will have its own sales and service team. The business will begin with more than 250 of its parents' largest multinational customer accounts from the target industries. The needs of other multinational corporations will be served through a common account management system by AT&T or BT account teams, as well as by their related distributors. Its initial annual revenues are expected to be more than $3 billion.
-- An International Carrier Services business that will manage all of the international correspondent relationships, including transit and hubbing activities, for AT&T and BT. This will enable customers -- both individuals and businesses -- to benefit as the venture develops low-cost routes between countries around the world. In 1998, AT&T and BT's combined international communications traffic, including international direct dial, is expected to be approximately 25 billion minutes. The business will establish itself as the industry's pre-eminent "carrier's carrier," providing wholesale trans-border services to telecommunications companies and Internet service providers around the world. Its initial annual revenues are expected to be around $4.5 billion. Supporting these businesses, the venture will have a world-class team managing its public, correspondent international network, which reaches 237 countries and territories, and its managed networks, which have 6,000 nodes in 52 countries covering nearly 1,000 cities worldwide.
Future Developments
AT&T and BT will combine their trans-border network investment programs and adopt a new common network architecture for the venture. This will accelerate the development and deployment of a new global platform linking the world's leading economic centers.
Based on IP technology, the new platform will initially carry voice and data at rates of 200 gigabits per second and will link 100 cities.
Among the business applications this new platform will make possible are:
-- highly secure, global virtual Intranets and associated IP-based applications;
-- multimedia networks with point-to-point and multicast data, video and audio capabilities;
-- a new system of global call centers providing 24-hour, multi-language customer support;
-- new communications services to support the traveling executive and allow virtual meetings to take place with anyone, anywhere.
Transition Period
Both companies are committed to ensuring that customers of their current alliances are served effectively and continuously. To that end, when BT completes its purchase of MCI's interest in Concert, AT&T will be appointed as a non-exclusive distributor of Concert services in the U.S. and will add extra capabilities to these services, which it will sell as AT&T Concert services.
As a result of the planned venture, the WorldPartners alliance will not be extended beyond year-end 1999 and AT&T will exercise its right to exit the AT&T-Unisource alliance by July 2000. AT&T's existing customers will be supported throughout the world. All existing AT&T and BT partner, distributor and customer contracts will be honored.
Between now and the closing of the agreement, the two companies will align their international operations, strategies and investments, within regulatory, contractual and legal constraints.
Each company will continue to plan and invest in the infrastructure necessary to ensure that all the resources needed to create a seamless, integrated, best-in-class global network are in place and ready when the venture is launched.
Because this is a growth opportunity for both companies, AT&T and BT do not expect any significant job losses to arise directly out of the formation of the venture.
For more information about the AT&T and BT global venture, visit our website at att-bt-globalventure.att.com.
(The formation of the venture is subject to certain conditions, including receipt of regulatory approvals, the closing of the merger between MCI and WorldCom and the purchase by BT of MCI's interest in Concert and the final negotiation and execution of definitive documents.)
AT&T AND BT GLOBAL VENTURE STATS AT A GLANCE
International MNC & Carrier Accounts: 6,500 International Voice Traffic: 25 billion minutes
International Private Line Circuits: 200,000
International Network Reach : 237 countries
Private Line Network Nodes: 6,000 in 52 countries
Frame Relay Nodes: 1,000 in over 40 countries
Customer Care & Network Management Centers: 12
MNC Points of Presence: More than 400
Year 2000 Revenue : $10 billion
SOURCE AT&T and British Telecom
07/26/98
NOTE TO EDITORS: NEW YORK NEWS CONFERENCE -- AT&T and BT will hold a news conference at NOON EDT today at AT&T's world headquarters at 32 Avenue of the Americas in New York City. AT&T Chairman C. Michael Armstrong, BT Chairman Sir Iain Vallance and Dan Somers, AT&T chief financial officer, will make remarks and take questions. Reporters who cannot attend can participate by calling in prior to noontime at 1-800-700-8174 in the U.S. or 1-612-332-0430 elsewhere. A replay of the news conference will be available for one week starting at 3:00 p.m. EDT today at 1-800-475-6701 in the U.S. or 1-320-365-3844 elsewhere. The access code is 399-702 for both. |
