British Telecom expects to reach a decision regarding the break up
of Concert Communications - its joint venture with AT&T - by
the end of the year.
Peter Bonfield, BT's chief executive, said that any restructuring
costs - including cash and non-cash costs - would be "substantial",
as would the resulting employee layoffs at Concert.
BT's finance director, Philip Hampton, added that if BT and
AT&T were to close down the joint venture, it would be unlikely
that BT would write off the entire £1.4bn book value of its stake
in Concert. He indicated that a more likely figure would be £500m.
Concert currently employes 5,900 people worldwide, with £4.8bn in
annual revenue, BT spokesman Michael Widley confirmed. Widley
declined to speculate on just how many people at Concert were
facing potential job losses.
When it came to Concert customers, Widley asserted that they would
continue to receive uninterrupted services, and that BT would want
to retain the customers it had when the joint venture was launched
in 2000. "There are a number of different permutations, but nothing
has been decided as of yet," he said.
Concert's customer base includes multinational companies,
traditional and emerging carriers, wholesalers and Internet service
providers (ISPs). BT and AT&T contributed about 207 customers
each to Concert at the time of its launch, according to a Concert
spokesman, who would not offer any other comment on the
situation.
AT&T said that "despite ongoing media speculation, no decision
has been reached", and that the company could not predict the
future outcome for Concert.
"The three companies are working together to ensure that customers
receive continuous, uninterrupted global communications services,
both during the discussion period and throughout the execution of
any decisions that are agreed," said AT&T spokesman Phil
Coathup.
"Any decisions made will be based on the best interests of
customers, shareholders and employees. Whatever decision is made,
AT&T's presence in Europe will continue and our commitment to
serving the global communication needs of multinational customers -
especially those based in, or with significant operations in EMEA
[Europe, Middle East and Asia] - remains undiminished," Coathup
added.
In April, AT&T said in its report for the first quarter of 2001
that Concert had lost $122m (£83.2m) due to lower revenue, higher
network costs and bad debt. Some reports estimate that Concert is
currently losing £20m per week.
Speculation about the future of Concert has been going on for
months as the talks over the dissolution of Concert continue to be
drawn out by BT and AT&T.
Concert lost £81m for its first fiscal 2001/2002 quarter, which
ended on 30 June. Owing to a weak wireless market and international
competition, Concert had to reduce its pricing while its network
capacity utilisation remained low, BT said at the time.
The losses incurred by Concert are making a difficult financial
situation worse for BT, which plans to reduce its $38.5bn (£26.3bn)
debt by more than £9bn ($14bn) before the end of the year. A large
part of that plan involves spinning off BT Wireless as its own
company.
The November spin-off of BT's renamed wireless division
MMO
2 has been largely overshadowed
by the questions concerning Concert.
David Varney, the chairman of
MMO
2, said the company expects to
spend £8.3bn on 3G mobile technology over the next five years. BT
spends £10bn alone on obtaining the licences for the next
generation services.