* Analysis of BT’s proposed acquisition of Infonet
Multinational companies have seen them come and go – Concert, Unisource, Global One and a handful of other global network ventures. Now a new one is about to be born, after British Telecom Group’s agreement last week to acquire Infonet.
But the question on the minds of many experts is: Will this newly merged global communications company succeed where the others have failed? It’s possible, they agree, but BT will have its work cut out.
BT will pay $965 million to acquire Infonet in a move aimed at increasing its global reach and customer base. The transaction, which is subject to regulatory and stockholder approvals, is expected to be completed in the first half of 2005.
The combination of BT’s and Infonet’s networks should strengthen the group’s presence in the crucial North American and Asia-Pacific markets.
Today, Infonet boasts operations in 70 countries, points of presence in 180 countries and a customer base of more than 1,800 large and midsize companies.
By joining forces, BT and Infonet expect their expanded reach, larger customer base and added network expertise to give them an edge over rivals such as AT&T Global Network Services, Equant NV (owned by France Télécom SA) and T-Systems International (a unit of Deutsche Telekom). But the new group could have difficulty winning new users with lingering memories of failed business relationships.
“After the collapse of WorldCom and KPNQwest, nobody is prepared to put all their business or even a huge amount of it into a single global contract,” says Ewan Sutherland, chairman of the International Telecommunications Users Association. “They are spreading it around as best they can.”
If the collapse of global ventures has been a bone of contention with multinational companies, it has hardly been the only one.
“It’s one thing to offer service primarily to banks and insurance companies in big cities,” Sutherland says. “It’s something completely different to offer service to companies that have factories, warehouses, offices and call centers spread in smaller cities across a country. Local access can lead to huge overheads, which have crippled global networking ventures in the past.”
Some industry analysts are also cautious in their assessment of the deal.
“For a start, the merger means less choice for users,” says Camille Mendler, an analyst at The Yankee Group. “BT has been gaining good momentum, and an acquisition could slow down the operator. BT has not been good at integrating its acquisitions.”
Playing down the past, BT CEO Ben Verwaayen referred to the Infonet deal as something different. “This is not a joint venture; this is a very focused acquisition and not old history,” he said. “We’ve always said we’d make acquisitions that enhance, not change, our strategy. And Infonet does exactly that.”
Kate Kerwig, an analyst with Current Analysis, warns that BT will need to finish uncompleted work. The group, she wrote in a research report, has spent significant time and money standardizing its global operations so that customers can buy the same products in each market and be supported by the same service-level agreements and customer care portal. “This unfinished rationalization process will need to continue following the Infonet acquisition and may now be more complex with another set of services to blend into the mix,” she wrote.
The link with Infonet also will let BT offer more value-added services such as network security and multimedia.
Blau is a correspondent with the IDG News Service.
