DESPITE CONCERT CANCELLATION, AT&T STILL EYES GLOBAL PLAY

AT&T and BT announced plans last week to unwind Concert, their 50/50 joint venture offering services to multinational corporations. But the shuttering of Concert does not mark the end of globalization for AT&T.

Since its formation in January 2000, Concert has failed to meet expectations. The latest projections from BT, for example, indicate that Concert will post a loss of $800 million for calendar 2001 before interest payments and taxes.

Like many joint ventures, Concert failed largely because its parents' different priorities resulted in a lack of direction, according to analysts. But Concert's failure does not signify problems with pursing a global strategy, which analysts believe is essential to AT&T's future growth. Quite simply, the company must pursue an international strategy in order to match the globalization efforts of its customers, said AT&T Chairman and CEO C. Michael Armstrong.

“We will now fulfill the objectives we had originally outlined [when forming Concert] but do it by building on the AT&T global investments we've been making,” Armstrong said.

Foremost among those investments is the Global Network business AT&T bought from IBM for $5 billion in December 1998. That acquisition, which brought AT&T more than 1300 dial-up POPs and dedicated access in 59 countries, gives the company one of the best IP-managed services platforms on the market, said Blaik Kirby, leader of Adventis' Global Carriers Practice.

Once Concert is dissolved, that investment will be combined with substantially all the assets, customers and distributor relationships AT&T originally brought to Concert, including the managed-services infrastructure in the Asia-Pacific region, international switching assets and undersea cable.

In addition, AT&T will receive certain Asia-Pacific frame-relay assets originally donated to the venture by BT in exchange for forgiving a $200 million loan and paying $200 million cash.

AT&T will use these assets as part of its effort to provide uninterrupted service to the 270 customers it will get from the unwinding of Concert. Through commercial agreements with BT, the company will offer the Concert portfolio of services for up to three years. Those factors make AT&T a major player in the multinational space, analysts said.

“They're one of the best-positioned providers out there — period,” said Floyd Greenwood, senior wireline services analyst for Prudential Securities. “They've got assets that reach all over the place, a global brand name and a very well-developed sales force.”

In fact, given widespread speculation regarding Concert's future, the end of Concert should help AT&T in its international efforts, said David Dorman, president of AT&T.

“What the multinationals have been saying to us is, ‘You've got to give me certainty where this is going,’” he said. “We can now tell them clearly, ‘Here's the basis to the network assets, here's how AT&T will offer it and this is the set of products and services that will run on those networks.’ We can now restart the forward marketing efforts and not have to be in this limbo that we've been in for the last year.”