Closure of Concert Joint Venture with AT&T
British Telecommunications PLC
5 January 2000
BT AND AT&T ANNOUNCE FINANCIAL CLOSURE OF CONCERT JOINT
VENTURE
New company begins 2000 as leading global services
provider
BT and AT&T today announced financial closure of
Concert, their global communications joint venture.
Concert begins operations in 2000 as the leading global
telecommunications company serving multi-national
business customers, international carriers and Internet
service providers worldwide.
Through Concert, BT and AT&T are aggressively
executing a strategy to take advantage of growing global
communications markets worth more than $100 billion.
Concert provides customers with communications
services on an unprecedented scale, scope and quality,
with the industry's broadest portfolio of voice, data and
Internet services. It has a direct sales force serving
around 270 multinational customers (MNCs). Through its
network of global distributors, it also serves an
additional 29,000 customers worldwide. Concert's frame
relay network reaches every major city in the United
States and the United Kingdom, and extends to an
additional 170 cities in 47 countries. Its global
public network reaches directly 237 countries - more than
any other existing network.
In addition to using BT and AT&T's extensive
networks in the UK and US, Concert has built a new state-
of-the-art high speed Internet Protocol (IP) backbone
network which spans 21 cities in 17 countries. This IP
backbone supports a wide range of industry-leading
Internet access, Internet backbone and IP virtual private
network (VPN) services. Work is now underway to
integrate the Concert network with the IP backbone
network which AT&T announced a year ago it would acquire
from IBM. When this integration is completed, as
expected, within the next 18 months, the Concert IP
backbone network will extend to more than 60 cities
worldwide. The combined network will support web
hosting, application services and other e-business
solutions.
Concert's IP network is interconnected with the
parents' extensive domestic IP backbone networks which
distribute Concert services in the critical US and UK
markets. The parents' domestic backbones will reach 450
points of presence by March 2000.
Sir Peter Bonfield, BT's chief executive, said:
'This is a new company for the new millennium addressing
the massive growth in e-business in the Internet enabled
global economy. Concert hits the ground running. David
Dorman was appointed CEO last spring and has built a
formidable management team which takes over full control
today.'
C. Michael Armstrong, AT&T chairman and chief
executive, said: 'Today's announcement is again evidence
of AT&T's commitment to execute our growth strategy, and
our continuing strong partnership with BT. Concert is
positioned to provide the best services to customers and
significant value to our shareholders. I've no doubt the
global venture will deliver on its promise.'
David Dorman, Concert chief executive, said: 'We've
heard what our customers want - global communications
made simple. Concert is the only company with the means
to deliver truly global services to customers by offering
them reach, connectivity, flexibility and seamlessness in
network services, applications and customer support. We
have a great market opportunity ahead of us, and fully
intend to take advantage of it.'
Both AT&T's and BT's extensive in-country
investments provide Concert with in-depth customer reach
through affiliated distribution and local connectivity in
key markets around the world. BT and AT&T collectively
have direct investments in companies in 30 countries.
Since announcing the creation of this joint venture in
July, 1998, BT and AT&T have invested jointly in Japan
Telecom and Rogers Cantel in Canada, and BT has taken a
stake in AT&T Canada. The two companies also formed
'Advance', a strategic mobility alliance, whose services
will be available through Concert.
Concert will provide an unparalleled portfolio of
managed services to its customers, including IP, managed
data and voice, transit and hubbing, and a full range of
services to selected MNCs. In total, these activities are
expected to generate revenues of more than $5 billion in
the year 2000, growing in excess of 15 per cent per
annum, the key driver being managed data and IP revenue.
In addition, Concert will deliver traffic for the
parents' international direct dial (IDD) voice
businesses, generating revenues of approximately $2
billion this year. This revenue reflects the cost to the
parents of carrying these IDD calls. As Concert drives
efficiency improvements, the unit cost of delivery, and
therefore these revenues, will decline, benefitting the
parents.
In aggregate, in 2000 Concert is expected to
generate revenues of more than $7 billion, EBITDA in
excess of $1 billion and EBIT of around $700 million.
Capital expenditure is expected to be around $1.5
billion in year 2000 as the venture aggressively deploys
its facilities-based IP network. Concert has fixed
assets of approximately $3 billion.
For BT and AT&T, Concert is expected to lead to
neutral to modest earnings accretion this year and
enhance both companies' long term growth.
Concert's 'New' Businesses
Concert combines the trans-border assets and
operations of BT and AT&T, including their international
networks, all their international traffic, and their
international products for business customers. Concert,
BT, AT&T and their family of joint ventures operate to a
common architecture, determined by Concert to ensure
provision of seamless service to customers. Operating
from multiple locations globally, Concert has about 6,000
employees and three profitable businesses:
Global Markets: Working through a global network of
distributors, Concert offers facilities-based
communications solutions for multinational companies and
other business customers and institutions worldwide. BT,
AT&T and other distributors around the world sell Concert
services including private line, frame relay, global
software defined networks and value-added IP services.
The business includes the activities of BT's wholly-owned
subsidiary, previously known as Concert. This year,
Global Markets is expected to generate more than 30 per
cent of Concert's total revenue.
Global Accounts: This business serves all of the
communications needs of most of the top multinational
customers from the financial, petroleum and information
technology sectors. It has its own dedicated sales and
service team of 2,000 people. This year, Global Accounts
is expected to generate around 35 per cent of Concert's
total revenue.
International Carrier Services: This business sells
services, based on Concert's extensive networks, to fixed
and wireless carriers and Internet service providers
worldwide, including AT&T and BT. This year, AT&T and
BT's combined international voice traffic is expected to
be approximately 25 billion minutes, unmatched by any
other operator. The business is establishing itself as
the industry's pre-eminent carriers' carrier, providing
wholesale transborder services to telecommunications
companies and to Internet service providers worldwide.
This year, International Carrier Services is expected to
generate more than 40 per cent of Concert's total
revenue.
NOTE TO EDITORS:
The revenue percentages shown for Concert's three
businesses include internal revenues arising from trading
within Concert. As a result, the sum of the percentages
exceeds 100 per cent.
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NOTE TO FINANCIAL ANALYSTS AND MEDIA: AT&T chairman
C.Michael Armstrong, BT chief executive Sir Peter
Bonfield and Concert chief executive David Dorman will
discuss today's announcement in a two-way conference call
for analysts and reporters at 2pm UK time (USEST 9am)
today, Wednesday, January 5. Callers outside the US can
dial one of three numbers: + 1 612-332-0345, + 1 612-332-
0335, or + 1 612-332-0226. From the United
States, callers should dial 1-800-260-0712
An audio rebroadcast of the call will be available,
beginning at 5pm today UK time (noon USEST) for 48 hours.
To listen to the audio rebroadcast outside the US callers
can dial + 1 320-365-3844 and then enter the access code
493431. U.S. callers can call 1-800-475-6701 and then
enter access code 493431.
Forward-looking statements - caution advised
Certain statements in this news release are forward-
looking. These include, without limitation, those
concerning: expectations regarding growth, revenues,
earnings, traffic and the communications market and
industry; the integration and expansion of networks and
the services they will support; value to shareholders;
capital expenditure; the possible or assumed future
results of operations of Concert; and statements preceded
by 'expects', 'anticipates' or similar expressions.
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. Because these statements involve
risks and uncertainties, actual results may differ
materially from those expressed or implied by these
forward-looking statements.
Factors which could cause such differences include,
but are not limited to: material adverse changes in
economic conditions in the markets served by BT; future
regulatory actions and conditions in BT's operating
areas, including competition from others in the UK and
other international telecommunications markets;
technological innovations; convergence of technologies;
the timing and entry and profitability of BT in certain
national and international markets; the risks, costs and
uncertainties (including the lack of available
information) in addressing Year 2000 issues; and
fluctuations in foreign currency exchange rates.