BT today announced that it has entered into binding agreements with AT&T to unwind Concert, their international joint venture, and to return its businesses, customer accounts and networks to the two parent companies.

BT and AT&T will each take ownership of substantially those parts of Concert originally contributed by them. The priority will be to ensure a seamless transfer of customer service and account management to BT and AT&T so that Concert's customers continue to receive uninterrupted and excellent international service.

While the joint venture will be completely unwound, commercial agreements between the two companies will be put in place to provide continuity and quality of existing services. Each company will have the ability to provide new and existing customers with global services based on Concert's products.

BT and AT&T will, at completion, also terminate their Canadian joint venture agreement, under which BT was committed to participate in AT&T's future obligation to acquire all of the publicly traded shares of AT&T Canada.

People

Many of Concert's 6,300 people will be employed by AT&T and BT after the unwind - with about a third coming to BT, roughly half of these in customer facing roles. It is expected that the unwind will result in up to 2,300 job losses in Concert with the associated costs being shared equally between BT and AT&T. Discussions are underway with the relevant works councils, employee representatives and trade unions.

Financial effect on BT

There will be a write down in the carrying values of the investments in both Concert and AT&T Canada, which at June 2001 were £1349m and £350m respectively.

BT plans, in the quarter ended 30 September 2001, to take a net impairment charge of approximately £1.2 billion in respect of the unwind. This includes the elimination of BT's £350m interest in AT&T Canada, already announced, all of BT's share of Concert's goodwill, approximately £300m, and a write-down in the region of £825m in fixed assets (mainly sub-marine cables) transferred to BT, offset in part by the $400m (£275m) receipt from AT&T.

BT will be released from its future expenditure commitment associated with AT&T Canada. This commitment would have required BT to spend up to C$1.65bn (£725m) in cash on or before 30 June, 2003.

It is also expected that, principally in the second half of the current financial year, BT will recognise further exceptional restructuring charges of around £200m, for BT's share of redundancy and other unwind costs in Concert and additional transition costs.

Concert currently generates operating losses, expected to be of the order of $800m (£550m) at the EBIT level in calendar 2001. It is estimated that, on a pro-forma basis, Concert businesses allocated to BT in the unwind generate more than half of these losses, with an estimated EBITDA loss of around $200m (£140m) in calendar 2001.

BT has put in place a detailed restructuring plan which is expected to return this business to profitability, at the EBITDA level, during the course of 2003.

Key elements of this plan include the re-negotiation of existing bandwidth supply agreements, the consolidation of channels, products and brands with a pan-European focus, the realignment of BT's major corporate account sales force and the re-scaling of network and operating functions.

http://www.groupbt.com/mediacentre/releases/2001/nr0165.htm