NETWORK WORLD NEWSLETTER: CAROLYN DUFFY MARSAN'S ISP NEWS REPORT 11/22/04 Today's focus: BT/Infonet merger: What it means to BT customers
Dear [EMAIL PROTECTED], In this issue: * BT to expand its global reach with Infonet purchase * Links related to ISP News Report * Featured reader resource _______________________________________________________________ This newsletter is sponsored by SBC Gimme Shelter! Converged Services Spell Relief For Beleaguered Network Managers Switched IP networks are rapidly becoming the corporate communications architecture of choice. By converging voice, data and video onto IP telephony platforms and Virtual Private Networks, enterprises can supply bandwidth when and where end users need it, while significantly lowering administrative and equipment costs. Click here to download this Whitepaper now http://www.fattail.com/redir/redirect.asp?CID=88631 _______________________________________________________________ NW'S RESEARCH CENTER ON SPAM Go to NW's Research Center on spam and find our in-depth review of 16 anti-spam products, our spam calculator to determine how much spam is costing your enterprise each year, the latest spam news, advice on how to fight spam and more. For the latest on spam click here: http://www.fattail.com/redir/redirect.asp?CID=88664 _______________________________________________________________ Today's focus: BT/Infonet merger: What it means to BT customers By Carolyn Duffy Marsan The handful of top-tier global service providers will shrink by one if BT's plans to acquire rival Infonet are approved by U.S. and European Union officials as expected. BT Group of London announced on Nov. 8 that it would acquire Infonet of El Segundo, Calif., for $965 million. However, since Infonet has $390 million in cash, BT will pay only $575 million for Infonet, which is less than Infonet's annual revenue of $620 million. Due to heavy competition and aggressive pricing in IP services, Infonet has been losing money in recent years even though it has grown its revenue by double-digit amounts. Infonet has indicated that it would be cashflow-positive by the end of the current financial year. If the deal goes through, Infonet will have the backing of a huge and profitable carrier in BT. BT officials are hoping the acquisition will be approved by June 2005. The combination of these two industry heavyweights will affect the purchasing decisions of network managers at multinational corporations based in the U.S., Europe and Asia. In today's newsletter, we'll look at the BT/Infonet deal from the perspective of BT and its customers, and next week from the perspective of Infonet and its customers. At first glance, the Infonet acquisition seems like a smart move for BT. Of course the devil is in the details whenever two large corporations merge, but analysts were generally positive about the BT/Infonet combination. "I'm always skeptical about mergers and there are always difficulties, but as mergers go this one makes sense," says David Rohde, a telecommunications industry expert with TechCaliber Consulting. "It's consolidation. It's an attempt to build market share for the stronger company by taking it away from the weaker company," says Brian Van Dussen, director of telecommunications research at the Yankee Group. "It's a good thing. It's healthy for the industry." For BT, buying Infonet is its latest attempt to build a strong global IP services capability. BT had a failed joint venture with AT&T called Concert that split up in 2001. "In BT's case [Infonet] makes strategic sense because when Concert split up, BT took the European assets and AT&T took the Asian assets," Rohde explains. "So AT&T has had a challenge in rebuilding its European infrastructure to compete with BT, which they've done. And now BT can build up its Asian infrastructure by buying Infonet. Infonet has lots of facilities and POPS in Asia, so this helps BT." BT says it is buying Infonet for three main reasons: * To get access to Infonet's 1,800 corporate customers for the company's managed voice and data services, the majority of whom are not BT customers. BT officials say they have only 25% customer overlap. Among Infonet's customers are IBM and Hilton International. * To expand its portfolio of services. Infonet's flagship managed network services - including secure VPNs over a private IP backbone or the Internet - aren't offered by BT, which has focused on outsourcing and systems integration deals in recent years. Infonet also offers stronger capabilities in mobility, remote access and security. * To expand its global reach. Infonet has network access in 10 countries where BT does not, including locations in central Europe, Latin America and Asia. Overall, Infonet has local operations in 70 countries and network access in an additional 180 countries. Infonet also has POPs in 3,000 cities worldwide, which will enhance BT's ability to service its multinational corporate clients. "Infonet gives us a great group of customers, and many of them are customers that we don't have," says Chuck Pol, president and COO at BT Americas. Infonet is "excellent at customer service and customer satisfaction." Pol says Infonet and BT offer complementary IP services. "They've got world-class products and services," Pol adds. "We just thought that in some areas where we needed to enhance our capabilities in the Americas and Asia Pacific, they gave us that edge." As part of this deal, BT is entering into a strategic relationship with KDDI, one of the current owners of Infonet, to pursue outsourcing opportunities for BT customers in Japan. BT says the Infonet acquisition will help with its corporate push into systems integration, IT services and outsourcing. The deal also will help BT's push into North and South America. BT Americas plans to expand its 19-node multi protocol label switching network to reach 23 sites next year. "Infonet will remain its own subsidiary with its own branded products for the foreseeable future," Pol says. "Once the deal is approved by government bodies, then we'll take a look at the service stacks offered by the two companies. In 18 to 24 months you'll start to see the two companies coming closer together." The deal is subject to approval by Infonet's shareholders and regulatory agencies including the SEC, the FCC and EU. Infonet's six primary shareholders - telecom operators from the Netherlands, Switzerland, Spain, Australia, Sweden and Japan - have already approved the acquisition, and they hold 97% of the company's stock. Once the deal is approved, BT officials said they would start combining the two businesses to realize cost savings. To get those cost savings, BT plans to eliminate redundant network elements and cut costs in back office and administrative functions. BT hopes to save $150 million in the third year following the merger. Analyst Van Dussen is optimistic about BT's ability to get the expected cost savings out of combining Infonet and BT. "I think it will be a relatively simple exercise," he says. "Infonet's just not that big. It would be very different if you were talking about two companies of similar size and scale. There are bound to be challenges and issues around back office and billing and that sort of thing. But in terms of product portfolio and account team management, I think it's going to be a relatively easy transition." RELATED EDITORIAL LINKS BT-Infonet has history to overcome Network World, 11/15/04 http://www.nwfusion.com/news/2004/111504btinfonet.html BT buys Infonet in key global expansion move IDG News Service, 11/08/04 http://www.nwfusion.com/news/2004/1108btbuys.html SLAs: BT focuses on reducing customer risk Network World ISP News Report Newsletter, 11/10/04 http://www.nwfusion.com/newsletters/isp/2004/1108isp2.html _______________________________________________________________ To contact: Carolyn Duffy Marsan Carolyn Duffy Marsan is a senior editor with Network World and covers emerging Internet technologies and standards. Reach her at <mailto:[EMAIL PROTECTED]> _______________________________________________________________ This newsletter is sponsored by SBC Gimme Shelter! Converged Services Spell Relief For Beleaguered Network Managers Switched IP networks are rapidly becoming the corporate communications architecture of choice. By converging voice, data and video onto IP telephony platforms and Virtual Private Networks, enterprises can supply bandwidth when and where end users need it, while significantly lowering administrative and equipment costs. Click here to download this Whitepaper now http://www.fattail.com/redir/redirect.asp?CID=88630 _______________________________________________________________ ARCHIVE LINKS Archive of the ISP News Report newsletter (formerly Internet Services): http://www.nwfusion.com/newsletters/isp/index.html _______________________________________________________________ Bandwidth or latency? How to solve application performance issues With more users at the edge, and more of the infrastructure at headquarters, how are enterprises increasing business productivity and application performance? 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