In December 2019, UK telecom giant BT Group agreed to sell BT Espana to investment fund Portobello Capital. This was the first part of its plan to dismantle and sell off its sprawling BT Global Services unit. This month, BT agreed to offload its Latin American businesses to CIH Telecommunications Americas, marking the second confirmed transaction.
Today we examine BT’s motivations and take a closer look at other businesses that are likely to be sold off.
Share Price Shocker
BT Group has been battling to restore investor confidence after a torrid period that has seen its share price plummet from GBP3.67 at the end of December 2016 to GBP1.92 at end-2019—and just GBP1.07 at the time of writing (March 2020).
New CEO Philip Jansen—who took charge of the company in February 2019—is keen to sell off fringe parts of the business to focus on BT’s rollout of a full-fiber broadband network in the UK.
Insiders believe that by offloading everything outside the UK, the group will help draw a line under overseas controversies—notably, significant accounting irregularities at BT Italia—and arrest the worrying share price slide at the same time.
Insiders believe that by offloading everything outside the UK, the group will help draw a line under overseas controversies—notably, significant accounting irregularities at BT Italia—and arrest the worrying share price slide at the same time.
In August 2019 BT announced its intention to delist from the New York Stock Exchange and deregister with the Securities and Exchange Commission as it seeks to reduce reporting costs and complexity.
However, with an enormous global footprint, the asset sale has proven to be complex and slow-moving. Here are some of the assets on the table.
BT Espana
Estimated Value: GBP300 million
Buyer: Portobello Capital
In December 2019 BT reached an agreement for the sale of its Spanish managed ICT services business—including its domestic network infrastructure—to funds managed by Portobello Capital. Assets included a 5,600km owned and leased optical fiber network, fully owned city fiber networks in Barcelona and Madrid, and three data centers.
BT will retain a presence in Spain with offices in Madrid and Barcelona, access points to connect to its global network and its cyber-security operations center. Through a wholesale agreement, BT will continue to have access to the Spanish infrastructure. The Spain-based business will also become a reseller of BT’s global products under a resale agreement.
The transaction is subject to regulatory approval and is expected to complete in the first half of 2020.
BT Latin America
Estimated Value: GBP1 billion
Buyer: CIH Telecommunications Americas
In July 2019 BT put its entire business in Latin America up for sale, with its internal deals team reportedly sounding out potential buyers for the sprawling business, which has a presence in most countries within the region.
Indeed, the sheer size of the company was expected to pose problems when finding a willing buyer.
However, in March 2020 BT announced that it had reached an agreement for the sale of selected domestic operations and infrastructure in 16 countries in Latin America to CIH Telecommunications Americas, an affiliate of CIH Technology Holdings.
Assets include two owned fiber networks with a total length of 650km, 2,000km of leased fiber lines, four data centers, and five teleports. The divested business is headquartered in Sao Paulo, Brazil.
BT and CIH have also entered into wholesale and reseller agreements, under which CIH will act as a regional channel for BT’s products and services and continue to supply domestic connectivity services to BT. BT says it will retain a "strong presence" in the region after the sale, delivering next-generation networking, cloud, and security services to multinational customers across 21countries.
The transaction is subject to regulatory approval and is expected to be completed during this calendar year. BT and CIH have agreed not to disclose the terms of the purchase, although industry insiders have previously valued the sprawling LatAm business at around GBP1 billion.
BT France
Estimated Value: Unknown
Buyer: Computacenter
Hot on the heels of its Latin American divestment, BT announced that it had entered into exclusive negotiations regarding the sale of its French operations to Computacenter.
Hot on the heels of its Latin American divestment, BT announced that it had entered into exclusive negotiations regarding the sale of its French operations to Computacenter.
BT’s French operations include management and maintenance of IT and network infrastructure, as well as networking and related professional services. During the fiscal year that ended March 2019, these operations generated a total revenue of GBP104 million.
BT is looking to retain a strong presence in France, serving multinational businesses and organizations. This includes access points to its global network and a cyber security operations center.
Computacenter describes itself as a "leading independent provider of IT infrastructure services" and works with large corporate and public sector organizations. It's a public company quoted on the London FTSE 250.
The transaction is subject to consultations with works councils over a minimum period of two months. This process will follow French government guidance issued as a result of the coronavirus pandemic. It will then be subject to regulatory approval, with completion expected by the end of 2020.
BT Italia
Estimated Value: Unknown
Potential Buyers: Telecom Italia (TIM), Retelit, Wind Tre and VueTel
In January 2017, Italian prosecutors opened a criminal investigation into accounting irregularities at BT Italia, with the probe focused on allegations of “false accounting and embezzlement.” As a consequence of the scandal, BT was forced to write down the value of its Italian business by GBP530 million ($660 million) rather than the GBP145 million it originally anticipated.
The company was put up for sale in April, as the British group sought to cut ties with the troubled unit.
However, the sale process has stuttered. In February 2019 BT admitted that it may have to cut the price tag of its Italian arm, after experiencing lukewarm interest. That month, four bidders took part in the second stage of an auction for the business: TIM, Retelit, Wind Tre, and VueTel.
Vodafone Italy walked away from the process altogether, while the remaining parties were said to be assessing the acquisition of selected assets rather than targeting an outright purchase. Further, indicative bids fell short of BT’s expectations. More than a year later BT was seemingly no closer to a sale.
BT Italia was formed in 2006 following the group’s GBP80 million buyout of B2B player Albacom in December 2004; BT had held a 26% stake in the firm since 1995.
BT Ireland
Estimated Value: EUR300 million
Potential Buyers: Mayfair Equity Partners
In April 2019 BT put its BT Ireland business up for sale, valuing the business at around GBP400.
Takeover rumors swirled all summer. In November 2019 it was erroneously reported that London-based TMT investor Mayfair Equity Partners had concluded a reduced EUR300 million ($263 million) takeover. The buyer supposedly entered into exclusive talks to buy BT Ireland back in August, but the takeover talk was quickly quashed.
BT Ireland operates a 4,300km fiber network in Ireland, a network operations center, a data center, and has 56 points-of-presence. If, and when, a deal concludes, the sale will break BT’s 20-year involvement in Ireland. BT entered the country via a EUR2.5 billion takeover of Denis O’Brien’s Esat Telecom in 2000.
BT Netherlands
Estimated Value: GBP100 million
Potential Buyers: Unknown
Finally, in August 2019, it was revealed that BT Group was aiming to sell its telecom towers and broadband infrastructure in the Netherlands in a package valued at around GBP100 million ($121 million).
BT has more than 30 years of experience in the Benelux operating region (which comprises Belgium, Netherlands, and Luxembourg). It has operated in Belgium since 1988, in the Netherlands since 1989, and in Luxembourg since the late 1990s.
The group presides over a large regional fiber network, which includes 6,700km in the Netherlands and 1,100km of fiber backbone in Belgium. Its footprint spans 65 PoPs and a city fiber network covering 10 cities.
In Benelux, BT Global Services serves a number of key customers, including the EU institutions, NATO and Eurocontrol in Belgium, and DE Master Blenders 1753 and Randstad in the Netherlands.
Tom Leins
Tom Leins is a Senior Research Analyst for TeleGeography’s GlobalComms Database. Based out of the company’s UK office, he also contributes to the company’s daily CommsUpdate newsletter, which includes his popular weekly MVNO Monday round-up. MVNO industry aside, Tom has developed a strong specialization in the U.S., Latin America, and the Caribbean, tracking mergers and acquisitions, spectrum auctions, regulatory developments, market opportunities, and growth trends.