BT targets China and India in overseas IT expansion drive

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The Independent Online

BT has set itself ambitious targets for growth outside Europe as it looks to step up its transformation into a global provider of IT services. The plan could result in BT acquiring smaller companies in areas such as China and India as it focuses on customer growth and improving its margins.

While many UK customers still associate BT with its traditional telecoms business, its Global Services division has become the company's main growth driver alongside broadband. BT Global Services serves global customers such as Reuters, Philips and Unilever across 170 countries and employs 27,500 staff. The unit booked £5.4bn in orders in the last financial year and accounts for almost half BT's overall revenue. In 2002 the division was burning more than £2m of cash a day. At that stage, Morgan Stanley advised the company to sell the unit for a mere £1.

Until recently, BT has been hesitant to set specific forecasts but it now feels confident its international progress will continue apace. The company expects to double the revenue it derives from the US, Japan, India and China to a combined €1.5bn (£1bn) by 2009 and also expects to continue adding staff in those regions. In Europe, it expects to grow revenue in both Germany and Italy to €1bn a year by 2009.

Andy Green, head of BT Global Services, said: "Over the past year, we have expanded our global network by 80 per cent. Customer demand has taken us from Angola to Zimbabwe." BT is also looking to double the size of its operations in Russia, Eastern Europe and Latin America, while trebling the size of its operations in the Middle East and Africa.

Mr Green said he expects the unit to hit its target for a 15 per cent margin at the earnings level within four years, compared with around 11 per cent currently. To achieve this, the company will slice £400m of costs from the business, although it is not planning significant job cuts. Mr Green said BT does not need to acquire companies to reach its margin targets but would consider acquisitions to improve its scale or to add customers. BT Global Services has made a series of small acquisitions in the past two years including Italy's Albacom, US rival Infonet and financial services network Radianz.

BT Global Services is also involved in the upgrade to the National Health Service's IT infrastructure. Despite recent press reports pointing to anaemic revenue from its investment in the project, Mr Green assured investors the company will make a profit over the lifetime of the contracts and has already booked hundreds of millions of pounds in revenue. He said BT would be interested in picking up more work related to the project if Accenture decides to withdraw from its commitments.