AT&T, BT pull the plug on Concert

AT&T and BT have decided to call it quits on Concert, the 50-50 joint venture offering communications services to large multinational corporations. Concert should be formally unwound during the first half of 2002.

Since its inception in January 2000, Concert has failed to live up to expectations, and is expected by BT to post an $800 million EBITDA loss in calendar 2001. Analysts have placed much of the blame on the 50-50 structure of the venture, which failed to give Concert clear leadership in tough economic times.

“We did work well together; we just didn’t get the results we wanted,” said C. Michael Armstrong, AT&T chairman and CEO. “So we both agreed that our original objectives to form Concert could now be better served by each of us directly being accountable for multinational customer global connectivity and services.”

In dividing up customers, suppliers and assets, each party will walk away from the venture with substantially the assets it originally brought. The one major exception will be AT&T’s ownership of certain Asia Pacific frame-relay assets originally contributed by BT.

To ensure continuity of service, the companies said they will work out 3-year commercial agreements allowing them to serving both new and existing clients with services based on Concert’s products.

Of the 6300 people employed by Concert, about 2300 employees will lose their jobs in the unwind, with the remainder going to work for either BT or AT&T.

AT&T will take a $5.3 billion charge on its third-quarter earnings as a result of today’s actions. BT said it expects to incur a charge of $1.7 billion. Both numbers reflect the dissolution of AT&T and BT’s partnership agreement covering AT&T Canada.