BT's recently announced $10 billion (#6 billion) joint venture withssive worldwide reach. AT&T (as predicted in PC Week, 21 July) was a radical move for the UK operator, dwarfing all its other ventures and closing off the market for other international carriers.
BT has signed away Concert, its international network, to AT&T, giving the US giant considerable control over its future in the international market.
Alan Pyne, analyst at telecoms consultancy, Schema, believes the match is a good one but that both companies are of a very similar culture "and are used to having the controlling hand, which could be interesting".
By bringing together their international networks, BT and AT&T aim to create a worldwide IP network that will offer new unified messaging and conferencing applications, managed intranet and IP services, frame relay (currently big in North America) and increase the firms' carrier market by selling bandwidth to ISPs.
"Together their international networks will enjoy unmatched economies of scale and reach," said Simon Weedon, telecoms analyst at Deutsche Bank.
The deal gives BT a single vehicle to provide end-to-end services to its international clients, rather than having to interconnect with telcos in the US. Opinion is divided on whether it will mean lower call charges but this is most likely in the long term.
Weedon believes BT and AT&T have the world sewn up. "BT has Europe, Australia and a good part of the Middle East, while AT&T has the Americas. The multinational networks market is currently worth $55 billion (#33.5 billion), growing to $200 billion (#122 billion) over the next five years and unlike any of the other global alliances, this one has a truly enormous reach."
Despite the size of the venture, Pyne said it will not be able to rest on its laurels. "Both companies have lost substantial market share due to the opening up of the market and deregulation so they have to see themselves as more than just a pipeline, which is where startups are gaining the edge."
A recent survey by MacTavish Hepburn, a research firm, found that 73% of insurance executives preferred IBM as a supplier of global telecoms services, compared with only 22% who chose BT and 18% who chose AT&T.
One question behind the joint venture is whether it might lead to a full-blown merger. Most analysts agree it allows AT&T to cherry-pick the BT assets it is interested in and that moving further together is not an obvious step. Others have pointed out that many international joint ventures in the telecoms market fail, suggesting it might be all or nothing for AT&T.
Players in the telcos market
AT&T has a great deal of unravelling to do before it can begin the operation with BT. The joint venture with BT turns the US telco's other partnerships upside down.
It is the leading player in an alliance called WorldPartners, in which it has a 40% stake. Japan, Singapore and Unisource are the other main contributors. The company admits this partnership has not been a success, with quality of service across the network being a key problem. This alliance will not extend beyond the end of 1999 but all customer contracts will be honoured throughout the transition period, the company said.
AT&T's relationship with Unisource is more complicated. It involves the national operators of the Netherlands, Switzerland and Sweden who agreed to merge their European networks with AT&T's network three years ago.
The alliance was badly damaged last year when Telefonica of Spain decided to withdraw and it made a net loss of $67.2 million (#41 million) in 1997.
The alliance has stated it is looking for alternatives but was unable to say more.
In the wake of the BT/AT&T joint venture, US telcos Bell Atlantic and GTE have formed a merger worth $121 billion (#73 billion) following in the footsteps of fellow telephony carriers Ameritech and SBC which signed a $135 billion (#82 billion) merger deal last month.
The Bell/GTE combination will become the US' largest local exchange carrier with 63 million access lines and the offer of bundled services including long distance, local and Internet services. It will also be the largest cellular service provider in the US, with 10.6 million customers.
Some analysts suggested the merger could be a back door for Bell Atlantic to get into the long distance market. Internationally, the merged company will have a presence in over 30 countries with virtually no overlap between the two companies' overseas assets.
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