BT agrees to unwind Concert

British Telecommunications PLC
16 October 2001



NR0165                                             October 16, 2001



       BT ANNOUNCES AGREEMENT WITH AT&T TO UNWIND CONCERT JOINT VENTURE


                      BT EXITS AT&T CANADA JOINT VENTURE





BT today announced that it has entered into binding agreements with AT&T to
unwind Concert, their international joint venture, and to return its
businesses, customer accounts and networks to the two parent companies.

BT and AT&T will each take ownership of substantially those parts of Concert
originally contributed by them. The priority will be to ensure a seamless
transfer of customer service and account management to BT and AT&T so that
Concert's customers continue to receive uninterrupted and excellent
international service.

While the joint venture will be completely unwound, commercial agreements
between the two companies will be put in place to provide continuity and
quality of existing services. Each company will have the ability to provide
new and existing customers with global services based on Concert's products.

BT and AT&T will, at completion, also terminate their Canadian joint venture
agreement, under which BT was committed to participate in AT&T's future
obligation to acquire all of the publicly traded shares of AT&T Canada.

AT&T will take full ownership of BT's interest in the Canadian joint venture
and in AT&T Canada, and will assume full responsibility for all future
obligations of the joint venture.

Sir Peter Bonfield, Chief Executive of BT, said: '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. Clearly there will be
substantial costs associated with an unwind but this solution gives BT a
better way forward than the status quo. The clarity of focus and control
resulting from the unwind will enable us to generate improved shareholder
returns. Our priority now is to eliminate the losses in our returned business
while continuing to deliver seamless solutions to our customers.'

     Sir Christopher Bland, Chairman of BT, said: 'I am glad that we have
regained control of our own destiny in the provision of services to
international customers. This is a further significant milestone in the major
restructuring that BT has undertaken over the past six months.'

Agreement to Unwind Concert and the Canadian Joint Venture

Under the agreement announced today, BT and AT&T will each take direct
ownership of substantially the businesses and assets that they originally
contributed to the Concert joint venture. There will be no continuing joint
venture between BT and AT&T. BT will acquire all of Concert's managed services
network infrastructure in Europe, Africa, the Middle East and the Americas ,
while AT&T will acquire the Asia-Pacific network. Concert's sub-marine cable
assets will be split as contributed. Each company will also assume direct
ownership of the customer and supplier contracts that they originally
contributed to Concert.

There will be commercial agreements for the provision of services between BT
and AT&T to enable each to provide services globally after the unwind of
Concert. Over the next two years these will generate currently estimated net
payments from AT&T to BT of at least $370 million.

Concert's service and operations centres, and operational support and other
systems will be divided in line with the assets they support.

Other key elements of the agreement are set out below:

  * AT&T will take full ownership of the Canadian joint venture through
    which BT and AT&T hold their interests in AT&T Canada. BT will cease to
    have any interest in AT&T Canada, and will be released from its future
    expenditure commitment associated with AT&T Canada. This commitment would
    have required BT to contribute up to C$1.65bn (£725m) to AT&T's obligation
    to acquire all of AT&T Canada's publicly traded shares on or before 30
    June, 2003; and
  * The working capital and other liabilities of Concert will be divided
    equally between BT and AT&T with the exception that BT will receive an
    additional $400m (£275m) reflecting the allocation of the businesses.

BT and AT&T will immediately begin detailed planning to ensure a smooth
transfer of Concert's businesses and customers to the parents. The transaction
is subject to regulatory and other approvals.

Customers

Multinational corporate customers served by Concert have contracts with BT, AT
&T and Concert. After the unwind BT and AT&T will continue to meet customers'
requirements in a way that best serves their needs.

Subject to the detailed terms of the agreements, it is intended that contracts
with Concert's distributors around the world will be transferred to the parent
originally responsible for the relationships.

Wholesale contracts and correspondent contracts with overseas carriers and
other service providers will be assigned according to the hub supporting them.
European hubbed contracts will go to BT and American hubbed contracts will go
to AT&T.



People

Many of Concert's 6,300 people will be employed by AT&T and BT after the
unwind - with about a third coming to BT, roughly half of these in customer
facing roles. It is expected that the unwind will result in up to 2,300 job
losses in Concert with the associated costs being shared equally between BT
and AT&T. Discussions are underway with the relevant works councils, employee
representatives and trade unions.

Financial effect on BT

There will be a write down in the carrying values of the investments in both
Concert and AT&T Canada, which at June 2001 were £1349m and £350m
respectively.

BT plans, in the quarter ended 30 September 2001, to take a net impairment
charge of approximately £1.2 billion in respect of the unwind. This includes
the elimination of BT's £350m interest in AT&T Canada, already announced, all
of BT's share of Concert's goodwill, approximately £300m, and a write-down in
the region of £825m in fixed assets (mainly sub-marine cables) transferred to
BT, offset in part by the $400m (£275m) receipt from AT&T.

BT will be released from its future expenditure commitment associated with AT&
T Canada. This commitment would have required BT to spend up to C$1.65bn (£
725m) in cash on or before 30 June, 2003.

It is also expected that, principally in the second half of the current
financial year, BT will recognise further exceptional restructuring charges of
around £200m, for BT's share of redundancy and other unwind costs in Concert
and additional transition costs.

Concert currently generates operating losses, expected to be of the order of
$800m (£550m) at the EBIT level in calendar 2001. It is estimated that, on a
pro-forma basis, Concert businesses allocated to BT in the unwind generate
more than half of these losses, with an estimated EBITDA loss of around $200m
(£140m) in calendar 2001.

BT has put in place a detailed restructuring plan which is expected to return
this business to profitability, at the EBITDA level, during the course of
2003.

Key elements of this plan include the re-negotiation of existing bandwidth
supply agreements, the consolidation of channels, products and brands with a
pan-European focus, the realignment of BT's major corporate account sales
force and the re-scaling of network and operating functions.

Transfer of Concert's Business to BT

The practical processes of planning a smooth transfer of customers will begin
immediately; the transaction is expected to close during the first half of
2002.

Following the unwind, all Concert assets returning to BT will be managed by
Tim Smart who will also continue in his current role as Chief Operating
Officer of Concert, managing the smooth transfer of business during the unwind
process. The returning business will be managed to give targeted improvements
in performance while preparing to move it back, as appropriate, to BT's lines
of business in an efficient manner.

Cautionary statement regarding forward-looking statements

Certain of the statements made above are forward-looking and are made in
reliance on the safe harbour provisions of the US Private Securities
Litigation Reform Act of 1995. These statements include, without limitation,
those concerning BT's strategy and its ability to achieve it; the
implementation of the agreements to unwind Concert and terminate BT's and AT&
T's Canadian joint venture; the benefits and advantages of the Concert
restructuring; BT's plans regarding Concert; growth of, and opportunities
available in, the communications industry and BT's positioning to take
advantage of those opportunities; expectations regarding competition, prices
and growth; BT's possible or assumed future results of operations and/or those
of its associates and joint ventures; capital expenditure and investment
plans; adequacy of capital; and financing plans.

Although BT believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that these expectations
will prove to have been correct. Since these statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements.

Morgan Stanley and Rothschild advised BT.



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