BT forms joint venture with KDDI to target Japan's largest multinationals

June 26, 2006

2 Min Read
BT Gets Back Into Japan

BT Group plc (NYSE: BT; London: BTA) has further bolstered its international presence by forming a 50/50 joint venture with KDDI Corp. (See BT, KDDI Team Up.)

The move marks a return to Japan for BT, which used to own a 20 percent slice of Japan Telecom Co. Ltd. It sold that asset to Vodafone Group plc (NYSE: VOD) in 2001 for £3.7 billion (US$6.7 billion) as BT retreated from the global marketplace. It also abandoned its Concert joint venture with AT&T Inc. (NYSE: T) around the same time. (See AT&T and BT to Unwind JV.)

Now, though, BT fancies itself as the global carrier of choice for large businesses, with AT&T one of its main competitors. (See BT Goes Global – Again! and AT&T Goes Global (Again).)

BT announced its return to the international stage in November 2004 when it announced the acquisition of Infonet, now BT Infonet , in which KDDI was a selling stakeholder. The two carriers have been working on the joint venture since that time, says a BT spokesman.

BT reckons the Japanese market is particularly ripe for its combination of international network connectivity and outsourced IT services, and that KDDI, Japan's second biggest carrier with fixed and mobile operations, can help it land some major deals.

A spokesman says BT expects the joint venture, which will have 100 on staff when it launches in a few months' time, to win $1 billion worth of business within its first three to five years of operation. The carrier cites an industry report from Gartner Inc. that estimates Japan's outsourcing market to be worth $90 billion a year.

The joint venture's main competition comes from AT&T Global Network Services Japan, which boasts the country's biggest operator, NTT Communications Corp. (NYSE: NTT), and IBM Global Services , as its partners.

Other competitors include Orange (NYSE: FTE), through its Orange Business Services division, formerly Equant, and Singapore Telecommunications Ltd. (SingTel) (OTC: SGTJY). (See FT Turns Orange.)

The move is BT's latest bid to build up its BT Global Services division, which has grown through a number of recent acquisitions and is also seeing the benefits of targeted network upgrades. (See M&A Activities Firm Up BT Global, BT Gives Global Services Update, and BT Deploys Ericsson VOIP Gear.)

BT Global Services now accounts for more than a third of BT's sales, having recorded revenues of £8.6 billion ($15.7 billion) out of a total £19.5 billion ($35.5 billion).

— Ray Le Maistre, International News Editor, Light Reading

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