• BT has long been seeking a new home for its international unit, which will now be merged with the international operations of Verizon Business to form a new 50/50 joint venture
• The new business, which hasn’t yet been given a name, will have more than 3,000 customers and annual revenues of about $4bn and is due to be formed next year
• The formation of the new company will allow US telco Verizon, under relatively new CEO Dan Schulman, to focus more on its home turf, something BT is already doing in the UK
• An executive from outside the operators has been appointed as the JV’s CEO, while both BT and Verizon say their international teams will join the new company

BT Group at last has a new home for its problem child, BT International, which is being merged with the international operations of Verizon Business to form a new 50/50 (as yet unnamed) joint venture (JV) company that will have more than 3,000 customers and annual revenues of about $4bn and which, as long as there are no regulatory hurdles, is due to start operations in 2027. 

The UK national operator has been seeking an investor or partner for its operations outside the UK since its CEO Allison Kirkby unveiled the telco’s new domestic services-focused strategy in May 2024 that included a focus on “exploring options to optimise our global business”. The company subsequently created a new unit, BT International, to house its non-domistic operations and assets, including its Global Fabric data transport platform, and earlier this year appointed seasoned BT executive Clive Selley, who knocked Openreach into shape and made it the national fibre access operations it is today, in charge – see BT appoints new Openreach and International chiefs.

And ever since it has been “exploring” those global options, BT has been loudly and proudly extolling the virtues of its Global Fabric network-as-a-service (NaaS) platform in a bid to persuade a partner of acquirer that it has the infrastructure and systems relevant to the needs of modern, cloud- and AI-native enterprises. (See What now for BT’s Global Fabric?)

Now Verizon, whose relatively new CEO Dan Schulman has, like BT’s Kirkby, has been shaking up the operator’s strategy and top table team, has emerged as BT International’s white knight, though the move, which reduces the balance sheets of both operators to the risks and uncertainties of the international communications services sector, appears to suit the US operator as much as it does the British telco: The two companies noted that, as a result of creating the JV, which will be “focused on multinational connectivity”, they would both be able to better “focus on their domestic markets, while providing support to the new joint venture as equal shareholders.”

And, of course, the new company comes with prime industry relationships from day one, courtesy of its joint owners: “On completion of the transaction, the new joint venture will establish commercial relationships with both BT and Verizon, providing a seamless, end-to-end service across borders including for our customers in the UK (BT) and the US (Verizon).”

Verizon will pay BT an “equalisation payment” of $625m, which would appear to be related to BT including its Global Fabric in the assets added to the JV, and the partners have already identified the executive they want to run the jointly-held operation. 

Martijn Blanken, who has previous senior level experience at major international players such as EXA Infrastructure, KPN, Openwave Systems and Telstra, is the CEO-designate of the JV: He will join BT on 1 September and work with the BT and Verizon teams to prep for the launch of the new company. Until such time as the JV becomes operational, Selley will continue to lead the BT International operations and Kyle Malady, CEO of Verizon Business, will run the US telco’s international B2B operations.   

The UK telco says BT International employs around 8,000 staff and “all of them will be transferring to the JV” when the transaction is completed (which, of course, is itself dependent on regulatory approval). Verizon didn’t give a number, but told TelecomTV that “international employees who primarily work on our enterprise wireline business will be moving to the JV”. 

So it seems there won’t be a headcount reductions at the respective operations ahead of the JV’s formation. 

What’s not known, though, is what might happen once the new company is formed and the impact this move will have on the financials of the telco partners: Both BT and Verizon say they are seeking to “unlock significant scale efficiencies across the combined global network and service operations following completion”.

And while the new partners have shared the JV’s expected annual revenue run rate of about $4bn, they have not identified the size of the total addressable market for the new company, stated whether they expect the new company be profitable at an operating level from day one, or detailed what sort of costs will be associated with the formation of the joint venture. However, James Ratzer at New Street Research, which focuses on the telecom and media sectors, appear to have been informed that each of the JV's owners will contribute $250m to the company at the start of its operations: Overall, he is positive about the deal from BT's perspective. (Ratzer's analysis and views are normally restricted to clients but TelecomTV has seen his research note on the JV that was issued on Monday morning.)

BT did note in a separate release that BT International is expected to generate adjusted revenues of £1.82bn ($2.4bn) and adjusted EBITDA of £108m ($143m) in the current financial year that ends in March 2027. This suggests the BT International part of the venture will be contributing around 60% of the annual revenues at the time of the formation.

What is for sure is that this will be a relief to BT that it has found an international partner, though the telco’s shareholders don’t appear to be excited in any way about the deal, as the operator’s share price on the London Stock Exchange was flat after the news was announced at 195.7 pence. 

As you’d expect, both BT and Verizon are presenting the new company, which they describe as being “designed specifically for a cloud-first world in the age of AI” (buzzword boxes ticked!), as a ground-breaking deal. “By combining global scale with infrastructure designed and built to support local compliance and sovereignty needs, the joint venture will create a stronger platform for growth and accelerate the rollout of next-generation connectivity platforms. Customers will benefit from secure and resilient connectivity designed to meet data, operational and regulatory requirements.” 

Essentially, the new company will be banking on the NaaS capabilities of the Global Fabric architecture to meet the connectivity and communications services needs of modern large enterprise users, but that is exactly what the Global Fabric was designed to support. If the JV is created as envisaged, that efficient, cloud-friendly platform will be put to the test like never before: BT International has already been promoting its ability to soon support the increasing demand for sovereign digital services in Europe. 

The announcement came with bullish statements from the partners’ CEOs. BT Group’s Kirkby noted: “Customers will benefit from new, secure and resilient connectivity platforms, which are designed for the age of AI and sovereign where it matters. It will create new opportunities for our people and long-term value for our owners. Today’s announcement marks a major milestone for BT International, and an important step forward for BT as a whole, as we deliver on our UK-focused strategy.”

Verizon’s Schulman added: "Our international customers require secure, flexible connectivity that works seamlessly across borders and cloud environments. When we thought about how to best support them, this joint venture was the clear answer: a cutting-edge, AI-ready and secure platform run by a single global organization dedicated to their needs. At the same time, our relationship with those customers will stay equally strong as we continue to directly provide them with the connectivity they need in the US."

There’s a lot of positivity about this and clearly it suits both parties, but such international B2B ventures have a troubled history. BT tried this approach previously more than 25 years ago with the formation of Concert with AT&T, which ended badly with a divorce in 2001 – corporate culture clashes were among the reasons for that strained relationship. Other similar efforts, such as KPN Qwest and Uniworld (formed by AT&T joining an existing international telco consortium called Unisource), suffered the same fate. 

Those examples are from a long time ago and in a market unrecognisable form today, and they were alliances rather than separate joint venture companies, but their lack of success show how hard it is to successfully combine existing operations, keep everyone happy and committed and also make money. So best of luck to the new venture!

- Ray Le Maistre, Editorial Director, TelecomTV