Building British Telecom as a Global Business
Mergers and acquisitions are one of the principle ways in a telecom company can grow worldwide and emerge as a global business. Faced with increased competition in the home market and worldwide, BT has turned to mergers and acquisitions in order to grow itself and face the competition in the marketplace. Despite lagging in the marketplace for significant period of time, BT was a cash rich company with the capability to acquire other major companies in the market. In order to survive in the marketplace, it started merger and acquisition activity in the year 1991. The first major acquisition it made was the US$ 1 billion joint venture with the MCI Communication Corporation for long distance telephony.
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The main objective of the JV was to increase the presence of BT in long distance telephone services targeted at the big American corporations. It also marked the first step in realizing its goal of emerging as truly integrated global business in the telecommunications sector. In order to further consolidate its position in the North American market, BT has expanded its presence through another major telecom company there, AT&T. AT&T was a leading telecom player and BT thought that an alliance with the company would help it gain further ground in the North American telecom market. The deal helped BT in increasing its presence in the North American market. But since there was a lot of clash between the management and culture of BT and AT&T, both the companies could not have a cordial relationship for long. They parted their ways in the year 2000 with AT&T retaining North America and Eastern Asia while BT retaining the rest of the global market.
Another important strategy followed by BT was the demerger of its crucial services. In the year 2001, BT has demerged its mobile services into a separate subsidiary called mmO2. From the time of the demerger, the companies of both the parent company and the subsidiary were traded separately in the stock market. mmO2 was finally bought out by Telfonica in a £ 18 billion deal. The deal has left BT with the non-mobile telecom services.