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BT Plans Further Global Push

BT Group plc (NYSE: BT; London: BTA) set out its international stall for analysts and the press at a London briefing Thursday, announcing revenue targets and hinting at further expansion through acquisitions. (See BT Outlines Global Vision.)

The carrier says its Global Services division, which provides network and IT services to large corporate customers in sectors such as finance, IT, retail, pharmaceuticals, manufacturing, and telecoms, is gaining market share from its chief rivals: AT&T Global Network Services , Orange (NYSE: FTE)'s Orange Business Services, Deutsche Telekom AG (NYSE: DT)'s T-Systems International GmbH , and Verizon Enterprise Solutions (formerly MCI) -– and has signed up about 1,000 new customers in the past 15 months. (See Unilever Extends BT Deal and Coral Bets on BT.)

That view of its success is shared by Lehman Brothers analyst Graeme Pearson. In a research note issued today he stated: "We continue to believe management is doing something very different to [its] peers and is taking share."

In BT's most recent full financial year -- 2005/6, ending March 31 this year -- BT Global Services generated £8.8 billion ($16.5 billion) in revenues, up 15 percent from the previous year, with revenues generated outside the U.K. accounting for £3.27 billion ($3.14 billion) of that total.

Now the carrier says it aims to boost revenues in some specific high growth markets and says it will double the revenues from the U.S., China, India, and Japan during the next three years, from €750 million ($949 million) in 2005/6 to €1.5 billion ($1.9 billion) in 2008/9, though Global Services CEO Andy Green declined to break down the revenue targets for each of those individual territories.

That doesn't mean, though, that BT will be profitable in every geographic market in which it operates. "We have to operate in India, China, and Japan. If we are not in these countries, we are not in business. But does it create profits [by being in these different countries]? Yes it does," says Green.

The carrier also views M&A activity as a way to grow its business even further. Green's division has made a number of acquisitions in the past two years, the most notable addition being Infonet. (See M&A Activities Firm Up BT Global, BT Goes Global – Again!, BT Buys Polish Outfit, and BT Lands Italian Job.)

"We continue to look at acquisition possibilities. India, China, and the U.S. are very interesting markets," says Green.

Partnerships are another way to expand business, with BT very confident the tie-up with Japanese carrier KDDI Corp. will pay dividends. (See BT Gets Back Into Japan.)

Green says his plans wouldn't be possible without BT's 21CN next generation network, which is being built out globally as well as throughout the U.K. (See BT Deploys Ericsson VOIP Gear.)

The international IP/MPLS network is now in 128 countries, and that will rise to 160 by the end of 2007, with a new city being added every week, says BT International's President, Francois Barrault. But "just having a network is not a differentiator in itself. It's all about how we use that network."

The carrier says the international IP network is critical to its ability to offer cross-border IP services such as the fixed/mobile convergence service BT Fusion, which will be offered to its large corporate customers later this year. (See BT Plans Corporate Fusion.)

Green believes only a handful of its competitors could match its physical network reach. "I can't see anyone outside AT&T, Orange, and Verizon having a true global IP network."

But not everything at BT Global Services is getting bigger. The division, which currently employs 27,500 staff globally, will also cut its annual costs by £400 million ($751 million) by 2008/9, says Green, through a refinement of its global sourcing and procurement practices, fewer failures, and a workforce reduction of more than 500 jobs.

"We buy a lot of products around the world, including software and IT equipment. We need to pass on some of the price pressures we're experiencing onto our suppliers."

— Ray Le Maistre, International News Editor, Light Reading

materialgirl 12/5/2012 | 3:40:35 AM
re: BT Plans Further Global Push Is global coverage necessary for a company to compete? Are we stuck with Orange, BT and VZ only or is this just a self-serving comment? What can an end-to-end network do that network handoffs absolutely cannot do? Do customers pay for this? I understand that MPLS QoS features do not translate well across network boundaries, but will standards not fix this over time?
paolo.franzoi 12/5/2012 | 3:40:35 AM
re: BT Plans Further Global Push
materialgirl,

Let's suppose you work for say Fidelity Investments in the IT department and you are choosing network vendors for a project. This project drives revenue and profits for your firm. Do you want to:

a - Have one vendor so that you can tell them when you have a problem or;

b - Have a multi-vendor network so that they can point at each other when there is a problem?

Your career is based on you choosing the best one. Remember, downtime will be millions of dollars per minute. Cost, while an issue, is less than an issue than downtime.

Now, do you think global reach is important?

seven
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