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Monday, July 27, 1998 Published at 18:26 GMT 19:26 UK

Business: The Company File

Global telecoms giant emerges

BT Chief Executive Sir Peter Bonfield announces pact

British Telecom has unveiled an global joint venture with US company AT&T.

The BBC's Rory Cellan-Jones looks at what the alliance will mean for customers
The newly-allied companies will be pooling their international operations in the £6bn ($10bn) deal.

The companies will be sharing international networks, traffic and products to offer a range of telecommunications and information services to large companies across national borders.

There will be no sharing of equity between the UK's biggest phone company and the largest American long-distance operator in the 50:50 venture.

From a base in the US, the new company will employ 5,000 people by the year 2000, many in Europe.

It will be headed for the first two years by BT chairman Iain Vallance, who will then hand over to an AT&T executive.

The implications: BT Chief Executive Sir Peter Bonfield talks to BBC News 24
Turnover is expected to amount to $10bn by 2000. The two companies will invest $1bn in high technology and emerging communications markets.

Multinationals to benefit

The new global venture is designed to provide a comprehensive service to multinational corporations which account for an estimated 20% of international telecoms traffic.

They are likely to be offered private networks with short-code access for their offices around the world, with full data-transmission and video conferencing facilities.

International telephone call centres could also be created with one 800 number allowing access from anywhere in the world.

A greatly increased bandwidth for international internet traffic could also be provided.

The two partners are initially targeting the large financial institutions and the international oil companies as their biggest customers.

But personal customers could ultimately benefit from cheaper international call rates if the new networks significantly increase capacity.

Disentangling alliances

Each company will have to dissolve its existing international alliances. AT&T will exit from its global alliance, WorldPartners, within a year, and from its European partnership, Unisource, by 2001.

BT's existing joint venture, Concert, a global telephone network for multinational businesses, will become the template for the new company. The partners will buy out the 25% stake held in that venture by rival MCI.

The new group's main European rival will be Global One, the international alliance of recently privatised Deutsche Telekom, France Telecom and the US long distance company Sprint.

Seeking partners

BT has been seeking a US partner since the collapse of its $24bn merger with MCI Communications Corporation last year. The new company will be seen as a rival to the merged MCI-WorldCom group, which has just been approved by regulators.

[ image: ATT&T has engaged in a fury of deal-making this year]
ATT&T has engaged in a fury of deal-making this year
Merger activity in the telecoms sector has been intensifying in the past few years. American companies have been in the forefront of change as internet, cable and mobile services have been converging.

BT Chief Executive Sir Peter Bonfield: 'Possibilities are endless'
BT chief executive Sir Peter Bonfield said: "Our two companies will develop an intelligent, global network."

He said services offered by the new company would include global electronic commerce, multimedia conferencing and public access to the Internet.

BT to benefit

BT's Chairman Sir Iain Vallance said in a statement: "By positioning ourselves at the forefront of the global information age, we will maximise opportunities to grow revenues and enhance profits for shareholders."

BBC business correspondent Rory Cellan-Jones: 'Hurdles'
The link-up with AT&T would give BT access to the US group's huge customer base and help bolster its plans to become an international carrier. BT currently provides global network services to 3,800 international customers through its joint venture.

Shares boosted

The announcement has been greeted as good news for consumers and share holders.

BT's share price on the London market rose initially by nearly 10%, but slipped back by close of trade in a weak market to finish up 43p at 868p, a 5% gain.

AT&T's share price has suffered lately as the scale of its takeover ambitions have led to fears that its value might be diluted.

There are still regulation hurdles which might prevent it getting off the ground at all.

The Federal Communications Commission is expected to make a decision on the merger next month.

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British Telecom press release

How AT&T reports the venture

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