BT to acquire Infonet

BANGALORE: Erstwhile British Telecom, BT has signed a definitive agreement to acquire Infonet, one of the world's leading providers of international managed voice and data network services. The transaction values Infonet at $965m (£520m).

Excluding Infonet's net cash balance of $390m (£210m), the aggregate value of the deal is $575m (£310m). The deal is subject to Infonet shareholder approval and regulatory clearances and is expected to complete in the first half of 2005. Shareholders representing 97 per cent of Infonet's voting share capital have committed to support the transaction.

The acquisition of Infonet marks a significant step forward in BT's strategy of addressing the IT and networking services needs of multi-site companies and organizations. It will greatly extend BT's global reach and will deepen the company's presence in North America and Asia Pacific. Infonet's recognized strengths in innovation, product quality and customer service will complement BT's strengths in the managed network services market.

Infonet's $620m of revenue, from the provision of cross-border services to 1,800 multinational corporate customers, significantly increases that element of BT Global Services' business.

Commenting on the deal, BT chief executive Ben Verwaayen said, "This is another milestone in BT's transformation into a leading global provider of IT and networking services. 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 expects to realize significant cost savings from combining the two businesses. Overlapping global network elements will be eliminated and efficiencies will be achieved, in part through the rationalization of country operations, back-office and administrative functions. Already identified actions are expected to reduce the annual cash costs of the combined businesses by $150m (£80m) in the third year following the acquisition. Infonet's net tax asset of £100m will add further value.

The integration of Infonet and BT Global Services will be phased to ensure service quality is maintained during a seamless evolution for customers. Whilst the transport networks of the two businesses will be combined rapidly, BT will continue to run the two product sets separately for a period, allowing the best of each to be incorporated as the service offering is combined. Infonet's experienced management team, led by its chief executive, Jose A. Collazo, will remain in place to manage the business, maintain continuity for customers and assist in the integration of the two customer bases and product sets.

Simultaneous with the acquisition of Infonet, BT will enter into a strategic relationship with KDDI (a major distributor of Infonet services) to address network-centric outsourcing opportunities for BT customers in Japan, and also for KDDI customers outside Japan.