Concert chief warns of telecoms shakeout

THE CHIEF executive of Concert, the joint venture between British Telecom and AT&T, yesterday predicted a "shakeout" in the soaring share prices of the new generation of telecom network operators.

David Dorman also said Concert could come to the stock market through an initial public offer (IPO) of a minority of shares as early as 2001. According to analysts, the funds raised from an IPO could be added to an estimated $5bn cash warchest that Concert has for infrastructure investment and acquisitions.

"I think there is going to be a shakeout," Mr Dorman said, commenting on the booming share prices of new carriers. "What the market values today is capacity. What it will value tomorrow is customers and revenue."

Mr Dorman said a one-year track record would be required before any move to take Concert public. "Practically speaking, I would feel better [about an IPO] after having reported results as a consolidated entity."

Concert is to launch formally in January. It combines BT and AT&T's foreign operations, including mobile, and is expected to have initial annual sales of about $10bn and operating profit of $1bn.

Mr Dorman, 44, is a telecoms industry veteran. Before taking the helm at Concert, which last week received US regulatory approval, he was chief executive of Pacific Bell, the Pacific coast local phone company, and before that spent 14 years at Sprint, the long-distance US carrier.

His remarks came against the backdrop of a near 50 per cent rise in the UK telecoms sector since late summer. Similar gains have been rolled up in the US, Europe and Asia.

While incumbents like BT and AT&T have rallied, new entrants like Colt and Energis in Britain and US players like Global Crossing have soared. Although their strategies differ, they are characterised by network construction programmes to install massive fibre-optic capacity, pre-tax profit losses and hefty market valuations - often more than 20-times annual sales.

Mr Dorman added: "The array of players out there trading at 100 times profit or revenues will not continue. Valuing businesses for their capacity and potential revenue is a short-term phenomenon."

He said the massively expanded fibre-optic networks across the Atlantic and Europe would be at the root of the future capacity glut. But in Asia and Latin America, Mr Dorman said network capacity may trail demand for some years.