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BT Restructures Globally, Buys Out Dutch Partner

In a move that may have far-reaching consequences, British Telecom announced Thursday a radical corporate restructuring to improve its flexibility in today's markets -- while also spending $1.8 billion on acquiring the remaining 50 per cent of Dutch communications venture, Telfort, from Holland's national railway company.

BT says its restructuring will make it unique among communications companies.

It plans to separate its U.K. fixed network business into wholesale and retail divisions, each under separate management. It is also re-grouping its other assets by market sector rather than geography, creating four new high growth-oriented businesses.

The new businesses are: Ignite, selling corporate and wholesale broadband; BTopenworld, selling mass market Internet services; BT Wireless, selling mobile services; and Yell, the former Yellow Pages, selling directory services.

The four businesses will operate not only in the U.K. but also internationally where BT has extensive interests. For example, although it has invested "only" $9.6 billion in continental Europe it says it can reach 80 per cent of the population with its mobile and fixed line operations.

Acquiring full control of Dutch operation Telfort indicates growing confidence at BT, after a rocky ride in the takeover stakes last year. In the long term, BT's restructing will almost certainly lead to separate listings of its various businesses - a move that would unlock what it believes is intrinsic but currently hidden value.

"This restructuring will strengthen our position in the key growth areas of broadband, consumer Internet and mobile and will help us to realize our aggressive plans to lead the next wave of the communications revolution," said Sir Peter Bonfield, BT's chief executive.

Sir Peter went on to say that the restructuring will lead to greater strategic flexibility, will tighten BT's operational focus, provide employees with more opportunities, increase management accountability and enhance transparency for investors.

BT's restructuring was warmly welcomed by AT&T, BT's partner in the Concert global venture.

"As BT implements its plans, it will be able to put more potential customers on its own networks. That means AT&T customers served through Concert will get even faster and higher quality service," said C. Michael Armstrong, chairman and chief executive officer of AT&T.

As Sir Peter Bonfield explained, BT views Europe as its home market, where it currently has over 18 million customers -- including 15 million mobile and 1.5 million Internet customers. The company has equity joint ventures or wholly-owned subsidiaries in all major European markets.

Rob den Besten, chairman of the executive board of Dutch railway company Nederlandse Spoorwegen (NS), said BT's offer had come at the right time as NS faces high investments in the near future.

"Intensive co-operation between NS and Telfort will continue for our telecommunications and e-commerce developments, where we will use Telfort and BT's knowledge and experience," confirmed den Besten.

In early summer, Telfort will be one of the first of BT's European ventures to launch Genie, it mobile portal and Internet service provider.



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