AT&T, BT pull Concert plug
October 16, 2001 Posted: 1741 GMT
LONDON (CNN) -- AT&T Corp. and British Telecommunications (BT) finally pulled the plug Tuesday on their Concert joint venture at a cost of 2,300 jobs and billions of dollars.
AT&T, the biggest U.S. long-distance phone company, expects to take a total of $5.3 billion in charges, while BT will incur costs of $1.7 billion.
New York-based AT&T (T: down $0.47 to $18.73, Research, Estimates) will take a $3.5 billion charge in third-quarter earnings relating to the dissolution of Concert. AT&T will take another take another $1.8 billion in third-quarter costs due to the unwinding of its 21 percent stake in AT&T Canada.
Both companies will take back most of the parts of Concert they originally contributed to the company two years ago. The joint venture provided data communications to hundreds of the world's largest multinationals.
AT&T and BT formed Concert in 1998 in an attempt to serve companies around the world. But mounting losses and dropping sales caused each company to search for a way to end the venture.
AT&T is restructuring with plans to split into four companies. The nation's top long distance phone provider has also been in talks with several companies, including Comcast Corp., to sell its cable business. In mid-July, AT&T unanimously rejected Comcast's unsolicited $44.5 billion offer for AT&T's cable unit, opening the door to other potential bids.
For (BT), Britain's second-biggest phone company, the move to end Concert clears the way for it to split into separately listed fixed-line and mobile telephone businesses.
BT wanted to leave the venture after it failed to meet sales targets. BT's share of Concert's losses was £81 million in the first quarter ended June 30.
Shares for AT&T, off 33 percent from their 52-week high, shed more than 2 percent Tuesday in early afternoon trading.
BT's shares rose 2.9 percent to 343 pence in early London trade on Tuesday. Its stock has fallen more than 30 percent this year and more than 73 percent from a peak of 1,339 pence in December 1999, on concern about the company's mounting debt. BT hopes to reduce debts to a level of £15 billion-to-£17 billion by March 31, 2002.
The long-awaited decision to scrap the two-year-old venture comes after months of negotiations about how to wind up a business that BT had hoped to use to establish a global presence but has failed to meet expectations in a changing market place.
"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," BT Chief Executive Peter Bonfield said.
"Clearly there will be substantial costs associated with an unwind but this solution gives BT a better way forward than the status quo," he said.
Under the latest agreement, BT does not need to pay £725 million for buying shares in AT&T Canada, another joint venture. AT&T and BT were obliged to buy all of AT&T Canada's publicly traded shares by June, 30, 2003. BT will give up its 9 percent stake in AT&T Canada, which is 21 percent owned by AT&T.
Concert employs 6,300 people, with 2,200 of them in Britain. Most of the remaining employees are in the United States. About 1,000 jobs will go in Britain and BT expects to pay £200 million in redundancy costs.
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