BT accelerates international exit after selling Spanish assets

BT accelerates international exit after selling Spanish assets

Bas Burger.jpg

BT has accelerated the transformation of its global unit with the sale of its Spanish managed ICT services business, which includes its domestic network infrastructure.

The Spanish sale to funds managed by local private equity firm Portobello Capital is part of BT’s ongoing transformation of its Global Services unit, which is focused on delivering next-generation networking, cloud and security services to multinational customers.

Although some outlets have reported that it’s the first international Global Services unit to be sold, the company did in fact sell a German unit, BT Stemmer, back in October 2018 after it had been with the Group for a decade. Reports have also emerged in August 2019 that BT was planning to sell more than £100 million in telecoms towers and broadband cables infrastructure in the Netherlands.

Through a wholesale agreement, BT will continue to have access to the domestic infrastructure, which provides networking services to around 600 major enterprises, including most of the IBEX-35 index companies, and generated around £230 million (€270m) of revenue in the 2018/19 financial year. 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 centre.

“The announcement is another key milestone in the execution of our strategy to make Global a more agile and customer-focused business,” said Bas Burger, CEO of BT Global Services (pictured).

“The transaction is great for BT, for our people and for our customers. Through agreements with the Spanish business, it provides continuity to both our multinational and local customers. It also enables us to focus on what we do best: providing secure connectivity and digital solutions to multinational companies globally.”

The Spanish business, which will be led by members of the current management team, will become a reseller of BT’s global products under a resale agreement. Assets in the transaction include a 5,600km owned and leased optical fibre network, fully-owned city fibre networks in Barcelona and Madrid, and three data centres. Burger has previously told Capacity that BT will close its data centres:  “We are not a data centre company. We have got 52. Some are very small and easy to wind down.” The load will be moved to BT Global Services’ preferred cloud partners, Microsoft Azure and Amazon Web Services. BT will “move people out and close” its data centres.

Reports of the Spanish sale first appeared in June 2019, when BT had purportedly begun exploratory talks with potential buyers of the unit and was hoping to raise €300 million in the process. At the time, Capacity asked BT about the reports and were informed by an official: “We don’t comment on rumour or speculation.” Some sources said that BT was originally considering bundling BT España with its Latin American operations, but had decided to try to sell the Spanish business alone.

“We are very pleased to invest in one of the leading providers of managed telecommunications services to the corporate market in Spain. We look forward to continued investment in the development of the business for the benefit of new and existing customers in the region,” added Luis Peñarrocha, a founding partner of Portobello Capital, who is also a telecommunications engineer having graduated from the Universidad Politécnica de Madrid.

Bas Burger told Capacity at the beginning of the year that BT was shifting the division to growth sectors and was parking traditional areas such as voice in the legacy category, which represented around 20% of its sales. He added: “The way we’re going to be fitter and leaner is by focusing on technology that allows us to be asset-light. We don’t need all those assets. We’re actively looking at what to do with those assets.” The plan was to reduce Global Services’ 17,000 staff by about a third – in line with the whole BT group’s planned reduction. Despite this, BT

Outside of the mature segment that includes conventional MPLS-based services that many international carriers offer, Burger and BT Global Services are focused on three service areas – cloud, security and dynamic network services. There are also three teams within the division, each addressing separate vertical markets: finance and insurance; manufacturing, resources, oil and gas and logistics; and pharmaceutical and media.

 The sixth CEO of BT’s international services arm came into the top job at BT Global Services at a difficult time in what’s long been something of a problem child for the BT group, culminating in 2017 when it had to write off £530 million after what the company called “inappropriate behaviour” in BT Italy. BT has been trying to sell BT Italy ever since and the head of BT Europe and the CEO of BT Italia both left after the alleged Italian fraud case, which was first reported in January 2017.

BT has been making headway in China this year after becoming one of the first international telecoms companies to be granted a domestic telecoms licence for nationwide services in China. BT was granted two licences - one for domestic IP-VPN and another to become a nationwide internet services provider (ISP) – which enables the UK-based telco’s Chinese arm to contract directly with customers in the country and bill them in local currency.

The transaction of the Spanish assets is subject to regulatory approval and is expected to complete in the first half of 2020.

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