BT Takes Control of Albacom

LONDON -- BT announced today that it had reached agreement with its three joint venture partners in Albacom to increase its ownership in the company to 100%. BT will acquire the 74% that it does not already own, from ENI, BNL and Mediaset, for a minimum price of €116m (£80m).

BT has been committed to the Italian business communications market, and to serving the needs of Italian corporates within the country and internationally, since it established Albacom in 1995.

100% ownership will allow BT to offer a seamless service to its customers in Italy, both domestically and internationally, taking full responsibility for products delivered on an end-to-end basis. BT expects the transaction to bring visible benefits to Albacom’s customers, allowing them to benefit from the full suite of BT’s products and services and its increased focus on network-based IT services.

This move reflects BT’s strategy of establishing a pan-European presence to service multi-site organisations, with strong local operations in key countries. Together with its recently announced acquisition of Infonet, the integration of Albacom will allow BT to provide an unmatched service to corporate and public sector customers in Italy and to international businesses with operations in Italy.

Under the terms of the transaction, BT has agreed with each of ENI, Mediaset and BNL that BT will manage a substantial part of their communications services needs for at least the next five years. The total annual value of these contracts is expected to be at least €150m.

Andy Green, CEO BT Global Services, said: "This integration will be good for Albacom, good for BT and good for our Italian customers. By fully combining our capabilities with those of Albacom, we will be in a position to win even more business in our target market segments and build upon the successes we are seeing in other parts of Europe. BT is delighted that the former shareholders will remain as customers and we are fully committed to meeting the future communications needs of ENI, Mediaset and BNL."

Corrado Sciolla, CEO of Albacom, said: "This is excellent news for Albacom, for our customers and for our employees. The integration of Albacom with BT, one of the world’s leading providers of global managed communications services, will bring real opportunities for us to move forward in Italy and to increase significantly our share of the Italian digital networking market."

Albacom will undergo a financial restructuring as part of the transaction. Each existing shareholder will settle directly its share of Albacom’s outstanding bank loan balance. BT’s 26% of this will be €65m. Albacom will retain existing long term lease obligations of €230m.

In consideration for the 74% of Albacom not already owned, BT will pay to the other shareholders a minimum of €116m. Of this, €55m will be deferred for five years and may be increased if Albacom’s profits in 2008/09 exceed certain target levels. In the event that the final payment does increase, the total cost to BT including debt will not exceed 4x 2008/09 ebitda.

BT expects to generate annual cash cost savings of at least €20m in Albacom through the application of BT’s international best practice processes and through improved purchasing power. The restructuring process, which has already commenced, will be led by Corrado Sciolla, who was appointed CEO of Albacom in March 2004.

BT expects Albacom to become cashflow positive, after accounting for financing costs associated with the transaction, during 2006/07.

The transaction is expected to be marginally dilutive to BT’s earnings per share in 2005/06, before becoming accretive during 2006/07. Any exceptional costs associated with the transaction are expected to be reflected in the current financial year.

The transaction, which is conditional only upon regulatory clearances, is expected to complete in January 2005.

BT Group plc