Richard Mahony
BT signs a €450m deal with Fiat, and buys Atlanet for €80m
BT said today that it has signed a five-year, €450m deal to supply Italian automotive giant Fiat with network services in Italy and 39 other countries across the globe. In a separate, linked deal, BT has bought Fiat's "captive" Atlanet subsidiary, which provides network services to both Fiat and external clients. Atlanet achieved a turnover of €155m in 2004, of which a significant chunk came from outside Fiat, including banking and manufacturing customers. Atlanet adds 24 voice PoPs and 42 Data PoPs to BT's Italian network, along with Metropolitan Area networks in Rome, Milan and Turin. Comment: Overall, we think that this is good news for BT. It has once again picked up a contract that contributes revenues and network reach - a nice way to grow if you can find the right business to acquire. Atlanet is a good fit - it is a cash-neutral acquisition that brings 300 people, and BT intends to increase its profitability through synergy savings of around €20m a year by 2008. We believe these synergies played a significant role in enabling BT to table a competitive bid. Overall, BT Italy has been strengthened through this transaction - its proposition is deepened through an extended network reach, its order book is bolstered and it has secured perhaps the glitziest account in the Italian enterprise market, which will only add to its local credibility. BT estimates that the net effect is a £1bn revenue contribution over the five-year period, which implies significant growth from the 2004 revenues. The other plus of the deal is that the Fiat business will add to BT's automotive expertise, something that BT will exploit. We expect BT Global Services to increasingly take a vertical approach to the market. The financial network BT Radianz, which appears to be performing well this year, is a testament to this. A point to note is that this is not about IT services; rather, it is predominantly network focussed. We pressed Andy Green on whether he was looking to acquire an IT services company in Europe. He suggested that he was always looking for such acquisition targets, but he's not interested in acquiring IT outsourcers, nor in buying enterprise application (SAP, Oracle etc) implementers, which sounds logical. Instead, he said BT is looking for IT services companies that do security, mobility, LAN or WAN-related services, adding that these are hard to find. This is very much a more network-orientated view of world than a few years back and it reflects BT's recent acquisitions - we think this is the right way to go, as it plays to the company's strengths rather than its weaknesses.
