BT warns Infonet revenues will be cut under UK rules

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BT Group revealed yesterday that the revenues of Infonet, the US network solutions company it is buying, will be $100m (£54m) lower when stated under UK accounting rules than the company's previous statements under American rules.

BT Group revealed yesterday that the revenues of Infonet, the US network solutions company it is buying, will be $100m (£54m) lower when stated under UK accounting rules than the company's previous statements under American rules.

Infonet is being bought by BT for a net outlay of £310m to boost its Global Services division. Infonet has stated revenues of $620m but this will be reduced by $100m when the company is consolidated into BT Group accounts. Ian Livingstone, BT's finance director, said the restatement of the revenues would have no impact on profits or cash flows going forward but reflected different definitions and revenue recognition practices in the US.

BT also played down fears that a large proportion of Infonet's revenues could disappear because they come from the rival telecoms groups that are selling Infonet, which has been on the market for three years. Infonet is owned by six companies including Swisscom, Telefonica, KPN and KDDI of Germany.

Jose Collazo, the chief executive of Infonet, said that about 30 per cent of its revenues had come via its former shareholders but all of that business had been earned competitively and could therefore be expected to stay in the future.

BT is buying Infonet to add its 1,800 mainly European multinational customers to its own network solutions business which supplies large companies with their own telecoms networks and technology. Although there is little customer overlap between the companies, there is a large amount of duplication when it comes to their technologies, such as overlapping networks and infrastructure technology. This overlap will be eliminated, however, leading to cost savings of $150m in the third year after the acquisition.

Infonet has local operations in 70 countries and has access to networks in another 180 countries. Its business is mainly focused on European customers but it also has a presence in the Americas where it generates $182m of business.

Reaction to the bid was muted, with BT's shares down 0.9 per cent to 192.5p. One analyst said: "It doesn't mean much strategically."

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