Concert goes off key

AT&T and BT have confirmed that they are in talks concerning the future of Concert, their 50-50 global joint venture created to provide communications services to large multinational organizations.

According to an AT&T spokeswoman, the venture, finalized in January of 2000, met its yearly revenue target of $7 billion but missed earnings, leading to current discussions about improving its profitability.

Analysts say much of the fault lies in the lack of attention Concert has been getting from its parents due to their own domestic troubles.

“[AT&T and BT] realize that they need to engage with other solid providers to become global players,” said Rudy Baca, an analyst with The Precursor Group. “The difficulty is that they've got systemic weaknesses in their core businesses that are taking their attention.”

Pascal Aguirre, vice president of Adventis, sees the blame lying not as much in the execution of Concert's business plan as in the structure of the organization itself.

According to Aguirre, the assets, footprint and operational reach of Concert do not match its purpose.

“The initial charter of Concert… was really not conducive to having a well-performing global communications company. It really was designed more to create an international wholesaler of bandwidth,” he said. “From a business fundamental standpoint they created a wholesale entity and gave it 270 retail accounts for it to chase.”

In addition, Aguirre said, the structure of Concert's European sales channels rely too heavily upon partially owned BT subsidiaries. These subsidiaries have little motivation to drum up business for another one of BT's ventures.

The AT&T spokeswoman declined to comment on the options being discussed by Concert's parent companies. She did, however, say that no time frame has been set for completion of the talks.

One of the proposed solutions reportedly being discussed has AT&T taking control of Concert, thereby giving the venture a clear leader to provide consistency and focus.

Though some speculated this idea was proposed by AT&T, the company's self-imposed breakup plans could get in the way. With management attempting to split the company into four separate businesses, taking charge of Concert would be another ball for AT&T to keep in the air.

In addition, BT might be hesitant to accept this plan, said Rena Bhattacharyya, senior analyst with IDC. “For BT, Concert is a cornerstone of their international strategy, so BT would be loosing a great amount by giving up their current position.”

Another possibility, and the one supported by Aguirre, would involve a greater commitment from Concert's parent companies.

“If you really try to architect a company to capitalize on [the global communications] opportunity… then ultimately the utopia would be merging AT&T's business services plus BT's Ignite with Concert,” he said.

Such a move would improve Concert's assets and make the business a more integral part of AT&T and BT. Then, said Aguirre, “you truly have one global company serving the needs of multinational corporations.”

The third speculated solution is certainly the most severe: the dissolution of Concert. According to several analysts, though, this is unlikely and would be a last resort.

“I think [dissolution] is highly unlikely given the importance of globalization,” said Baca. “They take themselves out of the global business market and they're signaling defeat.”

Indeed, though domestic troubles mean global strategies may not be getting the attention they deserve, they still represent an opportunity large carriers cannot afford to ignore, if for no other reason than that the market is there.

When asked about the importance of globalization to AT&T, the company's spokeswoman pointed out Concert's $7 billion in annual revenues as proof of its significance.

Market opportunities such as these make globalization inevitable, said Jim Rawitsch, managing director with Aberdeen Group. “It's going to happen, it's just a matter of time,” he said. “There's tremendous benefit to be derived by end users from the growth and development of pervasive, converged global networks.”