BT is to merge its telephony and data networking businesses into a single organisation, making it the largest IP convergence business in Europe.
The new organisation will not just offer Voice-over-IP services, but aims to add IP customer relationship management, messaging and videoconferencing services.
Tom Craig, former head of BT Business Information Systems, the company's telephony arm, will head the new unit.
"If we don't go into IP we are dead," said Pierre Danon (pictured), chief executive at BT Retail.
"There's a lot of new players in IP who can devastate incumbent businesses like BT. This is the biggest thing we are doing in IT. Broadband is just a side note by comparison."
Danon also announced that BT and Cisco had signed a letter of intent to co-sell IP-based services, with sales forces working closer together and new joint marketing schemes in Europe.
These include Instant Office, a complete IP solution for smaller branch offices, and Transform, a plan for larger businesses that need a complete IP system and broadband connection.
"It's an important step for both companies," said Rachel Power, an analyst at Canalys.
"Cisco needs the foothold in the telephony market and BT needs to grow this market too. On the other hand they'll need to demonstrate success quickly to prove they can do the job."
A report earlier this year from IDC estimated that the market for IP telephony would be worth $40.9bn by 2007.
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