In 1999, British Telecommunications (BT) and AT&T announced a $10 billion alliance to combine their international telephone operations and establish a new global internet system. The venture projected $10 billion in revenues and $1 billion in operating profits in its first year, with expectations of improving earnings for both companies "from day one." This new entity, a 50-50 venture to be based in the eastern United States with 5,000 employees, aimed to position the companies at the "forefront of the global information age" by offering seamless global services to multinational customers.
The alliance was designed to serve as a "carrier's carrier" by leveraging their combined international networks to provide long-distance services to other telephone companies. The companies noted that 90% of the global telephone market was opening to competition, and they sought to capitalize on this by attracting business from startup phone companies worldwide. The joint venture planned to operate in three main areas: an international carrier services business, a worldwide voice and data business for multinational corporations, and a global sales and service business targeting clients in financial, oil, and information technology sectors. They also intended to invest $1 billion, on a 50-50 basis, in high-technology U.S. businesses and emerging communications markets.
This strategic move followed BT's previous attempt to merge with MCI Communications Corp., which was disrupted by a higher offer from WorldCom Inc. The new joint venture with AT&T was expected to significantly expand BT's international presence, although it would not provide BT with a direct entry into the domestic U.S. telephone market. The companies predicted a 15% annual growth rate after the first year of operations. As part of the formation, AT&T would exit its existing international deals with Unisource and WorldPartners, while BT planned to buy out its global partnership with MCI, named Concert, in anticipation of WorldCom's acquisition of MCI. While the deal required regulatory approval in the United States, Britain, and the European Union, the companies anticipated its closure within one year.
