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Concert: What went wrong?



By CNN's Charles Hodson

LONDON, England (CNN) -- From discord to disillusion, and finally dissolution -- Concert, it seems, was doomed to failure from the start.

On a balmy August Sunday afternoon four years ago, journalists were summoned to BT Centre on London's Newgate Street for a major announcement, where they first heard of Concert as the name for the joint venture between British Telecom and its giant U.S. rival AT&T.

At the news conference and in an interview I had afterwards with BT Chief Executive Sir Peter Bonfield, the talk was of all the huge opportunities opening up: the chance to form a one-stop shop that would give global companies a global telecoms service.

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More recently, when BT ran into difficulties with debt, Concert was even mentioned as the telecom giant's potential salvation: the vehicle through which it would merge with AT&T.

But the simple fact is: Concert never made money; and its demise on Tuesday comes as no surprise. As Bonfield comments, this gives BT a much better way forward. As he might have added: BT wishes it never went there in the first place. So what went wrong?

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Analysts say the two parent companies' managements never quite walked the walk when it came to making Concert do the job it was founded to do: bring together all their international business.

Instead, BT and AT&T tended to compete with each other, which robbed Concert of revenues and left its management disillusioned.

But failure to clear away the conflict of interest was only one mistake, says David Staples, managing director for telecoms, media and technology at Fitch Ratings in London.

More fundamental was a series of over-optimistic forecasts about its Concert's marketplace, he says.

"What's really behind all of this is that there were expectations for international data growth, business services growth, Internet growth and the higher value-added segments that just have not transpired," Staples says.

To be fair, Concert is in good company. Almost all its would-be rivals have suffered from the same phenomenon.

Global One -- which originally involved Deutsche Telekom, France Telecom and Sprint, and now unites France Telecom and Equant -- has never made money, analysts say.

Unisource, the brainchild of KPN and Swisscom, has long since been wound up, and analysts say C&W Global -- the core business of Cable and Wireless -- is now also under heavy pressure.

Mark James, who follows telecoms for Nomura International in London, points to a consistent failure by C&W Global to meet revenue targets and wonders if it will ever turn a profit.

But James says the fundamental flaw in all of these ventures was programmed into them from the start: the whole concept of a one-stop shop for multinational corporates.

Concert had dreams of running telecom services for a significant portion of the world's 200-300 top companies -- clearly a wildly profitable franchise if it had ever happened. But it never did.

"How many multinational corporates actually want one bill?" asks James. "It's a very tricky business to do, they've never made any money out of it."

The inflated optimism of major telecom players three to four years ago is coming back to haunt them in another way: They have all invested so enthusiastically in infrastructure that there's heavy overcapacity in many areas and intense pressure on prices.

Against that background, it's hard for anyone in the industry to make a profit -- let alone a costly, unwieldy joint venture suffering from a lack of commitment from its parents.



 
 
 
 


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