Verizon Communications Inc. and the UK’s BT Group Plc have agreed to create a joint venture for their international businesses that will have a combined yearly revenue of about $4 billion.
As part of the deal, Verizon agreed to an “equalization payment” of $625 million to BT, the companies said in a statement on Monday, confirming a Bloomberg News report. The companies will hold equal voting rights in the venture, which is subject to regulatory approval.
Inside the deal
BT has been looking for options for its international business, which has weighed on growth for years. It offers service to multinational corporations in about 180 countries, but many of the contracts generate little profit and are costly to maintain.
Also Read: Alphabet joins Dow Jones: Why Google parent is replacing Verizon
Chief Executive Officer Allison Kirkby, who’s working to refocus the company on the UK market, said in 2024 that BT was weighing a carve out for the unit. The telecom company had approached AT&T Inc. and Orange SA about potential partnerships for the international business, Bloomberg News reported last year.
BT’s shares rose 1.3% to 197.50 pence at 8:28 a.m. in London and are up 7.3% so far this year, valuing the British company at £19.7 billion. Verizon closed at $46.54 in New York and has gained 14% this year, giving it a market value of $194.3 billion.
Under new leadership from Chief Executive Officer Dan Schulman, Verizon is focusing on customer growth and improving returns from its existing infrastructure. Schulman is cutting some 20% of the US telecommunications company’s staff and looking to divest underperforming businesses.
Verizon has a large international portfolio that includes wireline assets, private networks and cybersecurity consulting services, but not the consumer wireless side of the business that it’s best known for in the US. Its international connectivity clients include US embassies and the UK’s Thames Freeport.
BT cut its sales guidance after announcing the deal, saying the international business and other divestments will be treated as non-core assets. BT expects adjusted group revenue of between £17.1 billion ($22.6 billion) to £17.6 billion for 2027, compared to between £19 billion and £19.5 billion previously, it said in a separate statement. Adjusted earnings before interest, tax, depreciation and amortization for the period is seen at £8.1 billion to £8.2 billion, £100 million below the previous guidance range.
The balancing payment implies a generous sale multiple of more than ten times EBITDA, according to New Street Research analyst James Ratzer. “The deal looks like a neat and attractive exit for BT,” he said.
