Sprint's ION, AT&T-BT's Concert reach end of line

By Denise Pappalardo
Network World, 10/22/01

AT&T customers and industry experts are left wondering what's next for the telecommunications giant overseas now that Concert - its highly touted, joint venture with British Telecom - has been disbanded.

Concert never met the financial expectations of either company and incurred more debt than anticipated. In 1998, when AT&T and BT joined forces, Concert was valued at $10 billion. It never saw $10 billion in revenue. Concert posted operating losses of $800 million annually over the past few years, while BT and AT&T in upcoming financial statements are expected to post hefty charges in the billions.

CEO C. Michael Armstrong says Concert was targeting the European market, but sales were consistently weak in that region. This led to both companies pulling back capital investments, which resulted in "network deployment that was less than originally anticipated," Armstrong says.

With a few exceptions, each company is taking back the assets it brought to the venture. AT&T is keeping the Concert frame relay network in Asia, and it's also taking over BT's interest in AT&T Canada. AT&T is forgiving a $200 million loan it made to BT to make a 9% investment in AT&T Canada, and AT&T is assuming BT's debt in the Canadian division.

BT will retain its customers and networks in Europe and the U.K. AT&T will retain its 270 multinational customers and network assets that include international voice and data networks, gateways and undersea-cable assets. Concert customers will be migrated to BT or AT&T, but initially will likely not see much change. The companies have agreed to share their networks for the next three years to assure a smooth transition for customers.

"With the uncertainty surrounding Concert behind us, we will work on advancing our global capabilities under AT&T," Armstrong says. AT&T is now in charge of its own "destiny," he adds.

Concert marks AT&T's third failed, international joint venture, following the company's World Partners alliance with Japanese carrier Kokusai Denshin Denwa, Singapore Telecommunications and Telstra in the early 1990s and its Unisource joint venture with Telia, Swiss Telecom and Telecom Netherlands that was dissolved in 1999.

So what will AT&T do to fill this latest void?

The company says it plans to expand its existing AT&T Global Network Service backbone, which it acquired from IBM in 1998, but did not provide details. The AGNS data network spans 849 cities in 60 countries.

AT&T has several options in Europe, says Brownlee Thomas, an analyst at consulting firm Giga Information Group. It could team with Level 3 or possibly Infonet to lease capacity overseas. It would be somewhat ironic if AT&T teamed with Infonet, because that company now manages the former Unisource joint venture in which AT&T once participated.

AT&T may also expand overseas by acquiring lit fiber throughout Europe, she says. "AT&T doesn't have the strongest presence in Europe, but everyone knows them," Thomas adds. "They have the most-recognized brand name in the world."

Leasing capacity or buying fiber is essential for offering advanced VPN services, she says.

"If you don't control the network you can't have strong [service-level agreements]. In order to control the network AT&T has to steer clear of joint ventures," she says.