BT and AT and T are discussing merging their business services divisions.
After earlier discussions to combine their mobile units, the negotiations are now focusing on merging their business service arms. The discussions reflect the global nature of the telecoms industry and the continuing consolidation that is taking place within it. At the moment the individual sectors of both BT and ATT are more valuable than each company as a whole. In addition, both companies’ share prices have been badly hit in the last six months, and a deal could help them realize the true value of their assets.
BT and ATT are already in an ongoing relationship through the global Concert venture and wireless alliance. Concert would be combined with other business services units. The new company would focus on the international market for Internet and data services. Business services is a rapidly growing area and thus Ignite, created by BT to deal with its fast-growing international data services, would be included in the deal. The consultancy arms, Syncordia and Syntegra, would therefore also be included.
The deal would provide ATT with additional interests in Europe whilst BT would gain some presence in the US. Given BT’s existing debts – currently an estimated GBP28 billion – it makes sense to leverage continuing alliances and build them into something bigger, rather than acquire.
As the two giants form an Atlantic axis, it would not be a surprise if BT were to be taken over by ATT in the next 12 months since the two companies have chosen to weld their two fastest growing areas: mobile and ASP. However, if this were the case, they would be a need to create a global branding strategy.
