British Telecommunications PLC (BT) and AT&T Corp. have formally agreed terms on which to disband their Concert joint venture and return the assets to the parent companies, the two companies said in a joint statement Tuesday.
In addition, AT&T announced it would take a US$5.3 billion charge against its third-quarter earnings, largely as a result of the demerger agreement.
The decision to close the joint venture was made due to changes in the global market since Concert was founded in 1988, AT&T said in a statement issued separately. The company cited overcapacity and a sharp drop in telecommunication prices that dragged down revenue as reasons for the decision. In addition, many emerging carriers, who had been expected to be Concert customers and suppliers, had encountered financial difficulties.
BT and AT&T therefore decided that the best way to serve the interests of customers, shareholders and employees was through an orderly unwind, the companies said.
The demerger agreement is expected to close in the first half of 2002, and AT&T and BT will work together to provide a smooth transition for Concert customers. All existing contracts and service level agreements will be honored for three years, according to the joint statement.
Under the terms of the demerger agreement, BT and AT&T will re-assume control of the assets that each had contributed to the joint venture, including customer contracts, international transport facilities and gateways, AT&T said. The exception to this agreement is a frame relay network in Asia-Pacific, originally contributed to Concert by BT, which AT&T will take over, it said.
AT&T will take a $3.5 billion charge against its third-quarter earnings as a result of the Concert demerger, including an agreement with BT in which AT&T will assume BT's interest in AT&T Canada. AT&T will take an additional $1.8 billion charge against its third-quarter earnings under a separate agreement related to AT&T's stake in AT&T Canada.