What's happening with AT&T and BT???
First Reuters and then the Financial Times:
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AT&T declines comment on British Telecom rumors
Reuters Story - July 24, 1998 17:59
NEW YORK, July 24 (Reuters) - AT&T Corp. on Friday
said it would not comment on a report that it was close to
entering an alliance with British Telecommunications Plc
.
CNBC-TV on Friday cited sources saying that the two
companies are close to announcing a deal that would have AT&T
replace MCI Communications Corp. as British Telecom's
international partner.
CNBC said the MCI and British Telecom relationship, which
began in 1993, is expected to end once MCI's merger with
WorldCom Inc. is completed.
AT&T spokeswoman Ruth Lynn Newell said: "We as a matter of
policy do not comment on rumors or speculation" relating to
mergers or other business combinations.>>>>
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SATURDAY JULY 25 1998ÿÿTelecomsÿ
BT and AT&T set to form joint venture
Proposals to combine companies' international assets aimed at serving the needs of multinational companies, write William Lewis and Richard Waters in New York and Alan Cane in London
British Telecommunications, the UK telecoms group, and AT&T, the largest US long-distance operator, are close to forming a wide-reaching international joint venture.
An announcement could come as early as tomorrow, people close to the negotiations said yesterday.
If successfully completed, the venture is likely to become one of the most important players in the fast-expanding business of servicing the telecom needs of multinational companies in key markets around the world.
While there would be no exchange of equity, the investment from both companies is likely to amount to hundreds of millions of dollars.
AT&T's board was said to be meeting yesterday to discuss the terms of the deal, and people close to both companies cautioned that the agreement had yet to be signed.
In what is described as a complex deal, the companies are planning to place many of their international assets in the joint venture. "This is something that could be quite far reaching in pooling their services to worldwide business customers," said another person close to the talks.
"They are combining their significant international assets, principally those geared to serving large corporations," he said.
BT and AT&T last night both declined to comment. Rothschild and Morgan Stanley Dean Witter are thought to be advising BT and JP Morgan is said to be advising AT&T. The investment banks all declined to comment.
The UK group has been seeking a US partner since the collapse of its proposed $24bn merger with MCI of the US last year and has been talking with a number of US telecoms groups about reconfiguring Concert, its international telecom alliance with MCI.
For BT, linking with AT&T would enable it to gain access to the US group's huge customer base and help bolster its Concert Services division, which provides global managed network services to 3,800 international customers. BT needs a US partner to distribute Concert services throughout North America. For AT&T, the deal will be the third significant transaction the company has completed under the leadership of Michael Armstrong, its chief executive officer.
AT&T's recently announced plan to buy TCI, a US cable company, and its purchase of Teleport, a local telecoms carrier, are both seen as having helped fill the company's deficit in providing local telecoms services in the US.
Mr Armstrong is known to be concerned about the quality of service it is able to offer customers outside the US where AT&T operates though a series of loose partnerships called WorldPartners. As well, AT&T is currently a member of Unisource, an alliance of second-tier carriers in Europe. The US group has also recently started investing directly in overseas markets and in 1996 launched a direct challenge in BT's domestic market.
At one time it claimed it would "dig up the streets" to compete with BT. But its UK venture has proved comparatively unsuccessful and the company, while continuing to provide service to business customers, has all but withdrawn from the residential market.
Many in the telecoms industry are sceptical of the benefits that global alliances bring. For example, the alliance between Sprint, Deutsche Telecom and France Telecom has largely failed to meet its founders' expectations.
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SATURDAY JULY 25 1998ÿÿTelecomsÿ
BT/AT&T: Industrial logic adds up
lan Cane analyses the potential for BT and AT&T to realise the ambition of becoming a one-stop global telecommunications shop
AT&T's UK staff noticed the tell-tale signs earlier this year. Michael Armstrong, the US telecommunications operator's forceful chief executive, flew discreetly into London and left without making the usual courtesy calls on the company's local offices.
British Telecommunications executives were seen checking into AT&T's residential "Learning Centre" outside London. It all suggested that relations between the two companies, glacial while they competed inside and outside the UK, were warming up.
It now seems that for several weeks the two have been in negotiations which could lead to a joint venture to serve both companies' large corporate clients.
There are compelling reasons on both sides for a such a deal. The chief purpose would be to give new force and credibility to both companies' global alliances. All the big operators have formed global alliances to give their large, internationally based customers - which provide the lion's share of their international revenues - the benefits of seamless, one-stop shopping for all their telecoms needs. This market is estimated to be worth more than $10bn (œ6bn) a year.
In practice, none of the global alliances so far formed has lived up to the rhetoric. The difficulties of providing services across many national boundaries and many time zones have stretched their ingenuity and technical resources to the limit.
Concert, BT's global alliance with MCI of the US, started well and has more than $1bn worth of revenues billed. But last year's takeover battle, which saw WorldCom of the US trump BT's efforts to acquire the 80 per cent of MCI which it did not own, left the UK company with a badly damaged international strategy.
It was left without a significant partner in the US where it had hoped MCI would help it break into the lucrative local phone market. Sir Peter Bonfield, BT chief executive, made clear last week that any deal in the US would have primarily to support Concert and its customers.
BT's failure to cement its deal with MCI had diminished the appeal of Concert as a partner for operators outside the US. Telef¢nica of Spain, which had elected to join Concert, later decided to pursue its international interests with WorldCom.
BT also lacks strength in the Asia-Pacific region. It has failed to cement a relationship with NTT, the largest Japanese operator, although it has been investing in the region - yesterday it spent œ250m on a one third stake in Binariang, the Malaysian operator.
In Europe, however, BT is strategically well placed with partnerships and alliances in each of the main countries capable of distributing Concert services. Analysts point out, however, that BT has spent comparatively little on its European network to date and expansion will require heavy investment.
AT&T has different problems. No company is held in higher regard internationally - corporate telecoms managers claim it provides the best service even in areas where it has no presence - but outside the US its strategy has seemed indecisive and unfocused.
Its international vehicle is WorldPartners, an alliance that links it with KDD of Japan, Singapore Telecom and the European alliance Unisource.
But compared with Concert or Global One - the alliance between Deutsche Telekom, France Telecom and Sprint of the US - WorldPartners seems ill-defined. Membership is non-exclusive and the services it offers can be replicated by the other alliances. AT&T leads the consortium but it has so far failed to impose its standards on its partners. Analysts describe it as more of a commercial pact than a structural alliance.
On the other hand, it has some of the world's leading operators as members and has good international coverage, especially in the Asia-Pacific region. Mr Armstrong, who has transformed AT&T's performance inside the US since taking over, is known to believe the loose nature of the WorldPartners alliance does not give AT&T adequate control over the quality of service it is offering some of its most important customers.
There is strong industrial logic, therefore, for a partnership which would result in a high quality, high capacity network with global reach which would give Concert access to the US and better coverage of the Asia Pacific region. AT&T would have improved access to Europe and would be assured of better network quality.
The intricacies of such a deal are huge - AT&T is already active in Europe through Unisource, an alliance of national operators from the Netherlands, Switzerland and Sweden, while BT has commitments from WorldCom for the non-exclusive distribution of Concert services in the US.
But the telecoms industry is rapidly learning to live with a complexity which means that companies compete, collaborate and co-exist all at the same time.
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