NTT mulls buyout of IBM Global Network

Nippon Telegraph & Telephone is debating whether it should buy IBM's Global Network, officials familiar with NTT's plans say. NTT, Japan's largest telecoms company, recently agreed to link the Global Network to its own domestic network. The foremost obstacle to a deal may be price - reports earlier this month said the network could fetch between $US3 billion and $4 billion.

Nippon Telegraph & Telephone is debating whether it should buy IBM's Global Network, officials familiar with NTT's plans say.

"IBM's Global Network looks very attractive to us," an official at the Japanese telecommunications carrier says. "It is a huge opportunity to gain a global network and capture customers without the long-term investment."

But the NTT official adds, "There are many, many obstacles to overcome before we can conclude that this deal would really benefit NTT or not."

IBM disclosed this month that it is entertaining bids for its Global Network, which offers leased-line service to 100 countries.

In June of this year, NTT and IBM announced that they would link Global Network with NTT's domestic network here in Japan.

An IBM spokesman would not comment on what suitors, if any, have approached IBM. "We are entertaining proposals from companies from around the world," says Mac Jefferey, a Tokyo-based spokesman for IBM.

NTT, Japan's largest telecoms company, next year will be reorganised and allowed to offer overseas service for the first time in its history. The company is looking for ways to launch international services quickly and cleanly without tying itself to an exclusive telecom partnership of the kind that currently dominates the industry.

NTT Executive Vice President Masanobu Suzuki will meet this week with IBM officials to discuss "remaining issues" regarding the IBM network, Suzuki told IDG News Service today.

IBM is holding a large exposition outside of Tokyo this week that includes appearances by company Chairman and CEO Lou Gerstner and Sam Palmisano, IBM's senior vice president who oversees the Global Network.

Suzuki, who is the key decision maker on all of NTT's international strategies, would not state his company's position on the IBM network. An NTT investment in the network is a topic "for further discussions," he says.

Other NTT officials, however, acknowledged that a buyout is under consideration. They emphasised that many problems would need solving before NTT would make a move.

The foremost problem is the price, they say. Reports earlier this month said the network might fetch between $US3 billion and $4 billion.

"It is a huge amount of money, so I don't think any single company can buy it," says one NTT official, who works under Suzuki.

But if NTT brought in other investors, the challenges would grow. The partnership would have to be managed and policies on how to jointly market the network would need to be hammered out, he said.

Still another official at an NTT subsidiary that handles part of NTT's overseas business, said he is concerned that the IBM network holds many hidden costs. IBM is selling the network, in part, because of the estimated $200 million annual cost of keeping it running, according to IBM officials.

NTT officials agreed that given the speed of change in the telecoms industry, the Japanese telecom may not have much time to make a decision.

The company is now under the gun to transform itself from a state-owned telecom built on the fat of a protected, domestic market into a competitive global player. Though in the last two years NTT has turned its attention outward, critics, including some within the company, believe it has passed on too many opportunities. NTT has watched from the sidelines as the likes of WorldCom and AT&T whizzed by with mergers and partnerships that boosted their global businesses.

Officials agree that at least now the only NTT people who really know how close or far the Japanese telecom is from an investment are NTT President Jun-ichiro Miyazu and Suzuki.

"Suzuki-san is a very, very cautious guy so no one can predict how he will behave," one of the NTT officials says.

NTT, based in Tokyo, is at http://www.ntt.co.jp/.

Join the newsletter!

Error: Please check your email address.
Show Comments

Market Place

[]