Concert disharmony

BT's wireless/wireline split could alter joint venture with AT&T

BT's plan to split into wireline and wireless units may prove to be the impetus necessary to get it and AT&T to address problems with Concert, the telecom giants' financially disappointing global joint venture.

Designed to be an end-to-end operator for global business customers, Concert's plans have been hampered by the collapse of the economy, dotcom shutdowns and the bandwidth glut.

A recent BT prospectus outlines alternatives to the Concert joint venture that include narrowing Concert's business scope, terminating the joint venture or selling or combining its business services operations with AT&T's business services unit.

"Both companies want to do what's best for shareowners and customers," an AT&T spokeswoman said. "That's why we've been talking with BT for months now about whether to strengthen Concert and make it more profitable."

"There's more pressure on BT's side than there is on AT&T's," said Camille Mendler, director of convergent communications Europe planning group for The Yankee Group. "BT is under greater pressure from its investors to reduce its debt load, [whereas] lots of AT&T's issues are inherently more domestic than international."

A BT spokeswoman said the Concert issue is not related to BT's plans to separate into wireline and wireless units later this year.

"We want to resolve the Concert issue as soon as we can, and obviously we're moving toward doing the split, but they're not dependent on each other," she said.

Before making any decision, BT and AT&T must determine the value of Concert's customer accounts as well as the worth of the services and intellectual property that have been developed, Mendler said (see box). This task is complicated by the fact that Concert is not a traditional infrastructure company and that the partners own parts of the network.

Consequences of Concert's dissolution
Who it affects	Upside	Downside
Partners	Opportunity to take control of local customer accounts	Unknown partnership share, revenue share and customer ownership
Customers	Single supplier, promise of faster provisioning	Customer care threatened as AT&T, BT sort out which owns which account; can't play two companies off each other to lower price; still reliant on carriers for local tails (short leased lines between carrier POP and customer premise)
Competitors	Internal disruption may cause customer exodus; opportunity for niche players; outsourcing opportunity for global service providers to cut deals with Concert partners	Increasing mistrust of global service providers and outsourcing
Investors	Short term: BT lowers debt load; refocus BT on core activities	Long term: BT sacrifices global ambitions to remain parochial player if BT Ignite doesn't pick up the pieces; BT core activities still undefined
Internal staff	Opportunity to renegotiate package if identified as key employee	Redundancies more likely; unknown options package, if any
Source: The Yankee Group

"AT&T is interested in buying the assets of Concert, but only if the price is right," Mendler said. "Let's assume that BT brought more customers to the table than AT&T, and they say, ‘We want to take those customer accounts with us,’ then what would the value of the company be?"

If BT decides to rid itself of Concert, AT&T's business services unit could be left without a key international partner.

"BT sees AT&T is at a vulnerable point. AT&T's trying to reorganize. This may be the time when BT can get [the Concert issue] done," said Rudy Baca, global strategist for the Precursor Group. "BT has to spend so much time worrying about it and trying to make it work. They don't want to be tied to AT&T anymore."

But the dissolution of Concert would not necessarily signal BT's exit from the international market, Mendler said.

"BT is not ready to get rid of multinational customers," she said. "It is eager to rid itself of a joint venture that has never delivered what was promised."

If Concert is dissolved, BT could turn to BT Ignite to become its international arm. BT Ignite represents BT's international broadband and solutions business for European customers. Some in BT Ignite, however, feel that “multinational corporations are not the primary opportunity for BT Ignite,” Mendler said.

"I'm not entirely sure the BT Ignite strategy is stable enough yet," Mendler said. "I don't know if BT is exchanging one problem for another by removing themselves from Concert."
Toby Weber contributed to this article.