BT and AT&T Announce $10 Billion Joint Venture to Boost Earnings

Strategic Insights -

The British telecom giant British Telecom is set to reveal the details of a $10 billion (£6 billion) joint venture with AT&T, marking a significant shift in its international strategy. The joint venture is expected to boost BT's earnings in the first year, with analysts predicting a rise in earnings per share of 2p or 6% in 2000. The deal could add £3 billion to BT's market value, with shares expected to open between 40p to 50p ahead of their Friday close.

Key Takeaways:

  • The joint venture between BT and AT&T will offer telecoms services to multinational companies, pooling their transnational businesses, international networks, traffic, and products for business customers.
  • The initial focus will be on financial, information technology, and oil companies, with a global network expected to be up and running in three years.
  • The new company will have a separate board and will develop an internet protocol-based global network that will support services such as global electronic commerce.
  • Capital expenditure within the new business will be approximately $1 billion a year.
  • Analysts have expressed concerns about potential problems in integrating the two companies' management and potential complications arising from AT&T pulling out of other arrangements.
  • Sir Peter Bonfield, BT's chief executive, acknowledged the challenges but emphasized the potential benefits of the joint venture.

Statistics:

  • $10 billion (£6 billion) - joint venture investment
  • £3 billion - potential increase in BT's market value
  • 2p or 6% - predicted rise in earnings per share in 2000
  • 2000 - year in which the joint venture is expected to boost BT's earnings
  • $8 billion - current sales of the joint venture
  • $10 billion - expected sales of the joint venture in 2000
  • $1 billion - capital expenditure within the new business per year

Sources:

  • The Times, 1998