BT and Verizon spin off international networking arms into $4B joint venture

BT and Verizon are putting their international enterprise networking businesses into a 50:50 joint venture, creating a company with roughly $4 billion in annual revenue as both telcos re-focus on the markets that actually make them money. The proposed venture, announced on Monday, will combine BT International with Verizon's international enterprise wireline business. Once regulators sign off, the new company will serve more than 3,000 multinational customers across 180 countries, while its two parents return their attention to the markets that actually move the needle: Britain for BT and the US for Verizon. Verizon will pay BT $625 million to balance the relative value of the assets each side is contributing. The transaction is expected to close in 2027. For BT, the move removes a business that has long looked like the awkward relative in the family photo. BT's guidance for the year ending March 2027 forecasts 1.82 billion in international revenue but just 108 million in adjusted EBITDA, making it one of the group's weakest performers. Tom Oughton, analyst at Megabuyte, described the deal as strategically sensible for both companies, noting that BT International has been "a consistent underperformer" while Verizon has repeatedly characterized its own international revenues as insignificant relative to its domestic business. BT International has always been a drag on BT Group. It is far less profitable (BT reports a 47 percent UK EBTDA margin vs 5.9 percent for International) and has failed to grow, and we suspect a somewhat similar story for Verizon given it is immaterial relative to its US operations," Oughton said. Of course, the official line isn't about squeezing costs. BT and Verizon say the real prize is helping multinational customers navigate cloud infrastructure and the growing tangle of data residency rules. That also explains why nearly every paragraph of the announcement manages to mention AI. BT chief executive Allison Kirkby said the combination would create "a stronger, scaled connectivity partner" offering secure and resilient connectivity platforms "designed for the age of AI." Verizon chief exec Dan Schulman similarly described the venture as a "cutting-edge, AI-ready and secure platform." Strip away the AI messaging and the strategy is pretty straightforward. Combining two middling international operations creates more scale, reduces duplicated infrastructure and operations, and gives both companies a chance to concentrate investment where they still dominate. The joint venture will be incorporated in Jersey, although it will be headquartered and tax resident in the UK. Former EXA Infrastructure chief executive Martijn Blanken has been named CEO-designate, subject to the deal completing, while BT International chief executive Clive Selley will remain in place until then. BT also updated its financial guidance to reflect the carve-out. Excluding the international business and other disposals, it stuck with its target of doubling free cash flow to 3 billion by the end of the decade. For customers, not much will change immediately. BT International and Verizon's international operations will continue to run independently until regulators approve the deal and the joint venture officially opens its doors. (R)