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BT, AT&T may merge units
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May 14, 2001: 7:26 a.m. ET
Phone companies in talks to combine business services
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LONDON (CNN) - British Telecom and AT&T are in talks that could lead to the pooling of their telecom business services units in a separately-listed company.
Debt-laden BT and the U.S. telecom giant are considering creating a company that would include their ailing Concert joint venture and other business-related telecom services.
The new company may also include BT's Ignite unit, which offers business telecom services to European companies, and AT&T's business telecom operations.
The unit could be worth as much as $100 billion, according to one estimate, and could be listed as a separate company in London and New York.
BT details the options for Concert in a 111-page document that was being sent out to shareholders on Monday urging them to support a £5.9 billion rights issue aimed at reducings its debt burden of around £28 billion.
The document says discussions with AT&T (T: Research, Estimates) are about a variety of strategic alternatives including terminating the joint venture, narrowing its scope or expanding by bundling it with much or all of BT Ignite and AT&T's demerged business services unit.
Britain's second-largest phone operator says it sees significant value in BT Ignite and Concert and will keep under review whether the value is achieved through combining businesses, selling them off or separating them by way of a flotation or demerger from BT.
BT said last week its share of losses in Concert was £89 million in the quarter ending March 31, compared to a profit of £69 million in the same period a year ago. BT Ignite lost £90 million in the quarter.
"Concert is operating in a highly competitive international market and the recent fall in prices for carrying international traffic contributed to the loss for the fourth quarter," it said.
BT also outlined its plans to spin off its wireless unit, which owns operations in the UK, Irish Republic, the Netherlands and Germany. Two weeks ago, BT sold its Japan Telecom, J-Phone and Spanish assets for £4.8 billion to rival Vodafone, as it moves to cut its debts by about £10 billion this year. The company's debt has already cost its chairman, Iain Vallance, his job.
BT is also set to cut 5,000 staff as newly appointed chairman Christopher Bland aims to cut BT's operating budget by £575 million, the Sunday Business newspaper reported. BT employs 130,000 people in the UK.
In another report, the Financial Times said BT is considering the sale of its IT services operation Syntegra and has appointed investment bank Rothschild to market the business.
Syntegra was expected to attract trade bidders such as British telecoms and Internet group Energis (EGS) and U.S. computer services company Electronic Data Systems (EDS: Research, Estimates), the FT said. The unit is part of BT's broadband business services division Ignite. 
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