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Bt Is Burning Up The Wires (Int'l Edition)


International -- European Business: Telecommunications

BT Is Burning Up the Wires (int'l edition)

Furious expansion has given it a line into nearly every market

When merger talks between British Telecommunications PLC and MCI Communications Corp. came to a sudden end in July, 1997, so, too, it seemed, did the British company's global prospects. Chief Executive Officer Sir Peter L. Bonfield was disappointed but not deterred. Instead, he found a new partner in former rival AT&T. In July, 1998, the two companies agreed to combine all their international operations into a joint venture with $10 billion in sales.

Now, it's clear that the AT&T deal ushered in a new era of expansion for BT. Since then, Bonfield has been aggressively buying stakes in telecom companies across the globe and putting billions of dollars into Internet and cellular businesses. In the past year alone, BT invested $5 billion in Europe and $2 billion in Asia. International operations now account for 10% of the company's $27 billion in revenues, up from nearly nothing four years ago. "In the past three years, we've gotten much more focused on high-growth areas, and we're growing much faster than before," says Bonfield. BT's overall revenues grew by nearly 14% last year, up from an average of 4% the previous four years.LOCAL STAKES. Bonfield's strategy sets BT apart from its competitors on the Continent. Instead of investing in other former telephone monopolies the way its rivals generally do, BT tends to take a sizable holding in a number of new local players. It already has stakes ranging from 18% to 100% in telecom companies in every European Union member country. Now, it's setting its sights on countries that are likely to join the EU, such as those in Central Europe. In the beginning of August, BT joined forces with Prague-based information-technology company Telekomunikacni Montaze Praha to bid for mobile-phone licenses in the Czech Republic.

BT is two to three years ahead of its European competitors in terms of international expansion, analysts say. "BT was subject to competition much earlier than all the other European incumbents, and they were able to leverage that experience," says Susen Sarkar, a senior analyst at Yankee Group Europe in London. Meanwhile, American players such as MCI WorldCom and SBC Communications are coming on strong.

In Britain, BT is investing heavily in cellular and the Internet. Bonfield plans to spend $5 billion to upgrade its Internet and data capability over the next five years. BT acquired MCI's Concert business, which provides multinational companies with voice, data, and Internet services. BT is also part of a joint venture with Rupert Murdoch's BSkyB to offer interactive services via television.

Meanwhile, Bonfield is moving quickly to capitalize on opportunities in Asia. In the past two years, BT has bought mobile-phone companies in South Korea, Malaysia, and Hong Kong. And in July, it signed an agreement with China Telecom to distribute Concert. Although China's telecom market remains closed to foreigners, Bonfield is determined to be among the early entrants when it does open."THE ALLIANCE TO BEAT." Being first doesn't always guarantee success. Global alliances such as BT's venture with AT&T are notoriously fragile. Global One, a venture between Sprint, France Telecom, and Deutsche Telekom, appears on the verge of splitting up. The conventional wisdom is that single entities such as MCI WorldCom have a better chance of success since they have only one network and infrastructure and don't have to try to knit together two different systems.

Still, most industry watchers are optimistic about the proposed BT-AT&T venture. BT gains a desperately needed partner in the U.S., and AT&T gets an important boost overseas. The U.S.'s Federal Communications Commission has yet to approve their alliance, but BT and AT&T are coordinating their overseas investments in the expectation that it will. In April, the partners announced that they will take a 30% stake in Japan Telecom Co. for $1.9 billion. "If they carry on like this, they will be the alliance to beat," says David Neil, a vice-president at telecom consultant Gartner Group in London.

Bonfield isn't satisfied. "We need to move faster," says the 55-year-old workaholic, who routinely logs 14-hour days. In the highly competitive telecom business, he'll have to keep that up if he wants to stay ahead of the pack.By Kerry Capell, with Heidi Dawley, in LondonReturn to top


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