BT Body Blow Signals an End to Marconi's Independence

By Reece, Damian | The Independent (London, England), April 29, 2005 | Go to article overview
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BT Body Blow Signals an End to Marconi's Independence

Reece, Damian, The Independent (London, England)

Marconi hoisted the 'for sale' sign last night after seeing its shares crash 38 per cent following BT Group's announcement that it had not chosen the telecoms equipment maker as a supplier for its pounds 10bn network upgrade project.

Two years after narrowly avoiding going bust after a disastrous foray into the US during the boom, Marconi was sent reeling yesterday by BT's shock decision that it would place all of its equipment orders with eight overseas companies.

Marconi will not only lose out on new business that had been expected to be worth about pounds 500m over the next five years, but will also eventually lose a large part of its existing pounds 1.5bn of sales as BT gradually replaces its equipment with new items.

The development is a devastating blow to Marconi, which must now find a strategic partner to preserve its ongoing business. Jobs are expected to be lost at Marconi as a result of BT's decision. It employs 10,000 people around the world, of which 4,500 are in the UK.

The news was broken to Mike Parton, the chief executive, on Wednesday in a 6pm telephone call from Paul Reynolds, the chief executive of BT Wholesale, the division responsible for its core network. 'I know Mike well,' Mr Reynolds said. 'He and Marconi will continue to be major suppliers to BT.'

Marconi generates about pounds 300m of annual sales from BT which is under contracts of varying lengths of time up to another three years. While that business will not disappear overnight, yesterday's announcement means the medium-term future is extremely uncertain for the company.

Mr Parton said: 'This is a disappointing outcome from a very competitive tender process. Our products performed extremely well technically, but we have been unable to meet BT's commercial needs.'

The company was effectively outbid by larger suppliers which in many cases benefit from lower cost bases. BT has chosen the Chinese company Huawei as one of its major suppliers of new equipment, along with Fujitsu. The other winners were the French firm Alcatel, Cisco Systems and Lucent of the US, Ericsson, Siemens and Ciena.

These eight companies will now supply BT with the equipment it needs to transform the UK's main telecoms network into a system carrying voice calls and data using internet technology instead of the traditional local exchange-based switching systems.

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BT Body Blow Signals an End to Marconi's Independence


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