BT TO SELL DATACENTRES TO HP?

Posted on: 12/05/2008

According to TelecomFinance based on a report in the Times on Sunday, BT is reportedly in talks to sell its 24 British datacentres to Hewlett-Packard in a £1.5bn deal that would deepen links between the companies but not necessarily lead to an eventual merger.

The sale, expected to complete in the next few weeks, would involve BT transferring 400 staff to HP, and expanding its current agreement to manage HP's European voice and data networks worldwide. BT's non-UK datacentres are not included in the deal.

The deal is reportedly part of BT's efforts to boost profitability at its Global Services division.

The two companies, which have had an alliance for four years, will now gain bigger clout when bidding jointly for contracts.

Though insiders looked to play down the likelihood of the partnership paving the way to any M&A, bankers have long viewed Global Services as a potential disposal candidate that would appeal to global IT services groups such as HP.

TelecomFinance last month reported that following the announcement that Ian Livingston was set to take over from Global Services cheerleader Ben Verwaayen as CEO of BT, bankers and an industry source questioned whether the change in management would trigger a potential disposal of the IT services division.

Livingston and chairman Sir Michael Rake are reportedly embarking upon a "root and branch" review of the group.

During the leadership of Verwaayen, Global Services has become the telco's largest unit by revenue but remains very capital intensive.

The £1.5bn deal will improve BT's debt position, which is now about £10bn. Investors are reportedly asking the company to consider increasing debt to return cash.

In February, Global Services reported underlying earnings of £579m, a rise of 14%, and a 7% rise in sales to £5.6bn.