British Telecommunications (BT) expects to reach a decision regarding the breakup of telecommunication carrier Concert Communications, its joint venture with AT&T, by the end of the year, BT Chief Executive Peter Bonfield said Monday.
In a conference call, BT's finance director, Philip Hampton, added that if BT and AT&T were to close down the joint venture, it is unlikely that BT would write off the entire 1.4 billion pounds (US$1.5 billion) book value of its stake in Concert, indicating that a more likely figure would be 500 million pounds.
Any restructuring costs, which would include cash and noncash costs, would be "substantial" as would the resulting employee layoffs at Concert, Bonfield said.
Concert currently employes 5,900 people worldwide with US$7 billion in annual revenue, BT spokesman Michael Widley confirmed. Widley declined to speculate on just how many people at Concert are facing potential job losses.
When it came to Concert customers, Widley asserted that they would continue to receive uninterrupted services and that BT would want to retain the customers that it had when the joint venture was launched in 2000. "There are a number of different permutations, but nothing has been decided as of yet," Widley said.
Concert's customer base includes multinational companies, traditional and emerging carriers, wholesalers and Internet service providers (ISPs). BT and AT&T contributed about 207 customers each to Concert at the time of its launch, according to a Concert spokesman.
The spokesman added that Concert was unable to offer any comment on the situation.
AT&T said that "despite ongoing media speculation, no decision has been reached" and that the company could not predict the future outcome for Concert.
"The three companies are working together to ensure that customers receive continuous, uninterrupted global communications services, both during the discussion period and throughout the execution of any decisions that are agreed," said AT&T spokesman Phil Coathup in an e-mailed response to questions from IDG News Service.
"Any decisions made will be based on the best interests of customers, shareholders and employees. Whatever decision is made, AT&T's presence in Europe will continue and our commitment to serving the global communication needs of multi-national customers -- especially those based in, or with significant operations in EMEA (Europe, Middle East and Asia) -- remains undiminished," Coathup said.
In April, AT&T said in its report for the first quarter of 2001 that Concert had lost $122 million due to lower revenue, higher network costs and bad debt. Some reports have estimated that Concert is currently losing 20 million pounds (US$28.34 million) per week.
Speculation about the future of Concert has been going on for months as the talks over the dissolution of Concert continue to be drawn out by BT and AT&T. In July when it announced its last quarterly results, BT's Hampton said in a telephone conference call that BT would most likely have to write off its investments in Concert if Concert were to be broken up, but did not at the time did not reveal any potential numbers.
Concert lost 81 million pounds for its first fiscal 2001/2002 quarter, ended June 30, BT said. Due to a weak wireless market and international competition, Concert had to reduce its pricing while its network capacity utilization remained low, BT said at the time.
The losses incurred by Concert are worsening a difficult financial situation for BT, which plans to reduce its $38.5 billion debt by more than $14 billion before the end of the year. A large part of that plan involves spinning off BT Wireless as its own company. In fact, the purpose of Monday's conference call was to outline the Nov. 19 spin-off of its renamed wireless division MMO2 PLC, a topic that was largely overshadowed by questions concerning Concert.
David Varney, the chairman of MMO2, said the company expects to spend 8.3 billion pounds on 3G (third generation) mobile technology over the next five years. BT spends 10 billion alone on obtaining the licenses for the next generation services.