BT, AT&T Agree to End Joint Venture
Tuesday, October 23rd 2001, 12:00 am
By: News On 6
LONDON (AP) _ British Telecommunications PLC and AT&T Corp. are shutting down Concert, their money-losing international joint venture created three years ago to serve business customers.
The breakup of the venture will result in the loss of up to 2,300 of Concert's 6,300 jobs and $7 billion in charges, the companies said Tuesday.
BT said the venture's assets including infrastructure and contracts will revert to each of the companies.
``Since Concert was conceived as an international venture, the global marketplace in our sector has changed out of all recognition and we need to change with it,'' said BT chief executive Sir Peter Bonfield.
``Clearly there will be substantial costs associated with an unwind but this solution gives BT a better way forward than the status quo.''
The dissolution is subject to regulatory approval in the United States, Europe and other jurisdictions, AT&T said a statement, but is expected to be completed by the middle of 2002.
AT&T and BT have agreed to enter transitional agreements enabling them to continue to provide existing Concert services for three years, AT&T said.
BT said between 800 and 1,000 of the lost jobs would be in Britain. A spokesman said it was unclear how many of Concert's 3,100 U.S. employees would be affected.
BT and AT&T also announced they were scrapping their Canadian joint venture, with BT relinquishing its commitment to participate in AT&T's future obligation to acquire all of the publicly traded shares of AT&T Canada.
As a results of the venture's dissolution, AT&T said it will take charges totaling $5.3 billion against third-quarter earnings. British Telecom said it will take a 1.2 billion pound ($1.7 billion) charge and spend another 200 million pounds ($288 million) to help cover transition costs for workers as well as other expenses.
Concert has been hammered by the U.S. economic slowdown, intense competition and under-utilization of the service. It lost 81 million pounds ($118 million) for BT during the quarter ending June 30, compared to a profit of 60 million pounds a year ago.
The Concert joint venture was formed from the international operations of AT&T and BT in 1998 and the companies expected their combined bulk to create a global leader in trans-border telecommunications. However international telecom rates collapsed as capacity increased and the venture ended up competing for customers with its parents.
A former state-owned monopoly, BT has struggled as Vodafone Group PLC and other mobile operators have grabbed large chunks of the British market. It hopes to regain its edge by slashing the debts it acquired by buying stakes in several overseas firms and paying for costly third-generation mobile phone licenses in Europe.
In a bid to reduce its debt, BT is currently awaiting shareholders' approval to split into two separately listed companies, BT Group and mobile phone business mm02.
Meanwhile, AT&T has been in the process of dismantling its wide-sweeping operations, aborting its bid to create a one-stop telecom shop by purchasing cable TV systems and upgrading them for phone and high-speed Internet service.
It has already spun off AT&T Wireless, the nation's third-largest cellular provider, and its Liberty Media television programming business. AT&T is currently in negotiations with several parties about possibly selling its AT&T Broadband cable business.
Shares of British Telecom closed down 6.5 pence, or 1.9 percent, to 326.75 pence ($4.73) on the London Stock Exchange. Shares of AT&T closed unchanged at $19.20 in trading on the New York Stock Exchange.