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Optical/IP

BT to Extend M&A Spree

BT Group plc (NYSE: BT; London: BTA) is set to continue the spending spree it started in late 2004 with the acquisition of financial network services firm Radianz from its current owner, Reuters.

The acquisition, likely to be worth several hundred million dollars, would be part of a multi-billion-dollar managed network and services deal that BT and Reuters are planning. It would give BT control of a global extranet with 18,000 MPLS-enabled nodes that deliver secure access and services to thousands of financial services firms.

Such a deal would add further muscle to BT's growing international business, which was bolstered with two acquisitions in the final quarter of 2004 (see BT Buys Infonet and BT Takes Control of Albacom).

The deal has been in the works since Reuters bought out its former Radianz partner, France Telecom SA's (NYSE: FTE) global services provider Equant (NYSE: ENT; Paris: EQU), last October (see Equant Sells Radianz Stake).

Reuters paid $110 million in cash for Equant's 49 percent stake, valuing the specialist service provider at $224.5 million. BT says a price has yet to be agreed on, and that it is still performing due diligence on the loss-making venture, but a spokesman confirms that the deal is set to close before April.

Whatever the price, its value will be dwarfed by the expected size of the multi-year ICT (information communications technology) contract Reuters is expected to sign with BT. That deal, expected to be worth billions of dollars, would be another feather in the carrier's managed services cap (see BT Launches Outsourcing Offensive, BT Bolsters Its ICT Story, and BT Inks ICT Deal With HP).

Owning Radianz fits well with BT's larger strategy. It is seeking ways to increase revenues in what it calls "new wave" sectors, including ICT, and believes it can sell additional services to the existing Radianz customer base.

It would also make BT stronger in the U.S., where it has been forced to build a presence from the ground up following the disintegration of its Concert alliance with AT&T Corp. (NYSE: T). (See AT&T and BT to Unwind JV and BT Boosts US Backbone.) BT estimates that acquiring Radianz would almost double its U.S.-based workforce, from about 1,800 to 3,600.

Forrester Research Inc. analyst Lars Godell reckons the move is positive for all the parties involved. Radianz has been a drain on resources for Reuters and Equant, but will provide greater opportunities for BT in the financial services sector, which has "an insatiable appetite for more bandwidth," writes Godell, in a recent report.

Nick McMenemy, head of strategy and business-critical operations at pan-European operator and BT competitor Interoute Telecommunications Ltd., reckons BT is getting its M&A strategy right. He believes the Infonet acquisition makes a lot of sense for the British operator, and that taking over Radianz would "be a shrewd move" that will give BT a lot of additional value-added services opportunities.

— Ray Le Maistre, International News Editor, Light Reading

goblin 12/5/2012 | 3:30:54 AM
re: BT to Extend M&A Spree Radianz is not MPLS enabled and will not be for at least 3-4 years. There will be big migration and that too if it works on MPLS. MPLS is not the most effective technology thatGÇÖs a cure all for Radianz woes. Most hardware will also require forklift upgrades. It is likely Radianz will bleed BT in its current form. The silver lining is the Reuters account but it also has lots of skeletons of dinosaurs in the cupboard in the form of TDM x-25 etc. etc.
Headcount will also be effected as BT has most functions duplicated and moreover all Radianz employees are not based in US.
wbcarley 12/5/2012 | 3:30:53 AM
re: BT to Extend M&A Spree I would reserve judgement about how long it will take to MPLS enable RadianzNet.

However, it is not fair to say that "most hardware will also require forklist upgrades." Radianz's network is based on Cisco GSR in the core, 7200/7300 at the edge, and various (but all state of the art) Cisco CPE. The network covers over 40 countries, connects over 10,000 customer sites, contains over 20,000 Cisco routers, and is 100% IP. So what exactly needs a forklift upgrade, and what would you upgrade it to?

Also unfair to say that "Radianz will bleed BT in its current form" as Radianz is both EBITDA and Free Cash Flow positive.

No disagreement that Reuters has a lot of TDM and X.25, which will be moved to IP.
goblin 12/5/2012 | 3:30:52 AM
re: BT to Extend M&A Spree "Would reserve judgement about how long it will take to MPLS enable RadianzNet."

So you agree Radianz is not on MPLS

"However, it is not fair to say that "most hardware will also require forklist upgrades." Radianz's network is based on Cisco GSR in the core, 7200/7300 at the edge, and various (but all state of the art) Cisco CPE."
7200 non VXR 1720, 2600 and more kit is end of life. 7200 architecture is already beaten. 7300 are still running experimental IOS

"The network covers over 40 countries, connects over 10,000 customer sites, contains over 20,000 Cisco routers, and is 100% IP. So what exactly needs a forklift upgrade, and what would you upgrade it to?"

IN order to run MPLS on provider routers boxes like GSR will be required instead of current P edge boxes.

"Also unfair to say that "Radianz will bleed BT in its current form" as Radianz is both EBITDA and Free Cash Flow positive."

Delayed migrations or an unmigrated Radianz will be the same story repeted over what could have been done in last 3-4 years and what went wrong.

No disagreement that Reuters has a lot of TDM and X.25, which will be moved to IP
bithead1500 12/5/2012 | 3:29:45 AM
re: BT to Extend M&A Spree "Would reserve judgement about how long it will take to MPLS enable RadianzNet."

So you agree Radianz is not on MPLS

"However, it is not fair to say that "most hardware will also require forklist upgrades." Radianz's network is based on Cisco GSR in the core, 7200/7300 at the edge, and various (but all state of the art) Cisco CPE."

7200 non VXR 1720, 2600 and more kit is end of life. 7200 architecture is already beaten. 7300 are still running
experimental IOS

bh1500>> The Cisco 7200VXR is a fully supported product with one of the richest feature sets (including MPLS) of any mid-range routing platform and continues to perform as specified, fully meeting the PE router requirements in a majority of Radianz PoPs. The Cisco 7300 runs publicly released and fully supported Cisco IOS software, not an experimental version.<<

"The network covers over 40 countries, connects over 10,000 customer sites, contains over 20,000 Cisco routers, and is 100% IP. So what exactly needs a forklift upgrade, and what would you upgrade it to?"

IN order to run MPLS on provider routers boxes like GSR will be required instead of current P edge boxes.

bh1500>> The current PE routers, the Cisco 7200 & 7300, are fully capable MPLS PE routers, including MPLS TE, L2VPN & L3VPN. These routers also provide the required interfaces, cost points, and scaling factors which have matched the Radianz PE router functional requirements.<<
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