British Telecom to Buy Infonet

By Colin C. Haley

November 08, 2004

The telecom giant will pay $965 million to gain network assets and customers in North America and Asia-Pacific.

British Telecom will pay $965 million for Infonet , improving its ability to offer managed voice and data offerings for multinational corporations in North America and Asia-Pacific.

The sale should close by mid-2005, pending regulator and shareholder approvals (Infonet's largest stakeholders have already signed off on being acquired).

When it does, BT will gain network systems and 1,800 customers, including pharmaceutical giant Bayer, consumer and IT manufacturer Hitachi and shipping specialist Cronos.

The large and diverse client list fits BT's strategy to shift away from residential phone service and towards enterprise network and IT service. It's a similar tack taken by U.S. telecom providers such as AT&T .

"It is our goal to be the first choice for multi-site organizations around the world as they address their increasingly complex communications needs," BT CEO Ben Verwaayen said in a statement.

Infonet, which specializes in mobile data, network security and multimedia products, also has about $390 million cash on hand, making BT's net cost about $575 million. BT expects significant cost savings from combining the two businesses.

Areas that will see consolidation include overlapping network elements, country operations, back-office and administrative functions. Cuts will trim the costs to the businesses by $150 million in the third year following the merger, BT said.

The BT-Infonet marriage is the second major international network deal in as many weeks.

A week ago, Videsh Sanchar Nigam Limited said it would pay $130 million for Tyco's undersea fiber-optic network.

If approved by regulators in the United States, India and other countries, the move would give VSNL, a telecom and Internet services provider, a network spanning 37,000 miles and three continents.



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