BT to Extend M&A Spree
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