Verizon Communications Inc. and UK’s BT Group PLC have agreed to form a joint venture for their international businesses that will have total annual revenues of about $4 billion.
As part of the deal, Verizon agreed to an “equity payment” of $625 million to BT, the companies said in a statement on Monday, confirming the Bloomberg News report. The companies will have equal voting rights in the venture, subject to regulatory approval.
inside the deal
BT is looking at alternatives to its international business, which has had a hit to growth for years. It serves multinational corporations in approximately 180 countries, but many contracts make little profit and are expensive to maintain.
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Chief Executive Alison Kirkby, who is working to refocus the company on the UK market, said BT is drawing up a plan for the unit to be spun off in 2024. Bloomberg News reported last year that the telecom company had approached AT&T Inc. and Orange SA about a potential partnership for international business.
BT shares rose 1.3% to 197.50 pence at 8:28 a.m. in London and are up 7.3% so far this year, valuing the British company at £19.7 billion. Verizon closed at $46.54 in New York and is up 14% this year, giving it a market value of $194.3 billion.
Under the new leadership of Chief Executive Officer Dan Schulman, Verizon is focusing on customer growth and improving returns from its existing infrastructure. Schulman is cutting about 20% of the US telecommunications company’s workforce and is considering selling off underperforming businesses.
Verizon has a large international portfolio that includes wireline assets, private networks, and cybersecurity consulting services, but the consumer wireless side of the business is not what it is known for in the US. Its international connectivity customers include the US Embassy and the UK’s Thames Freeport.
BT cut its sales guidance after the deal was announced, saying international business and other divestments would be treated as non-core assets. BT expects adjusted group revenue for 2027 to be between £17.1 billion ($22.6 billion) and £17.6 billion, compared with a range of between £19 billion and £19.5 billion previously, it said in a separate statement. Adjusted earnings before interest, tax, depreciation and amortization for the period are seen at £8.1 billion to £8.2 billion, £100 million below the previous guidance range.
According to New Street Research analyst James Ratzer, the balancing payout implies a generous sales multiple of more than ten times EBITDA. “The deal looks like a clean and attractive exit for BT,” he said.