Telecom has put the brakes on signing up a new IT supplier citing the uncertainty around the company's future structure.

According to an internal note the company's executive team decided against inking a major deal with a single supplier "in the current uncertain environment".

Telecom confirmed in February it was reviewing the management of its internal technology systems, much of which is now outsourced.

In 1999, EDS beat IBM to win a 10-year $1.5 billion contract to supply Telecom's information systems services. EDS has since been acquired by Hewlett Packard as part of a US$13 billion ($18.4 billion) global deal and now trades as HP in New Zealand.

The seven technology companies that presented "white paper" proposals aimed at improving the company's internal IT services have been whittled down to three - IBM, HP and India-based Tech Mahindra.

Chief technology officer David Havercroft told staff: "Given the unknown outcome of Telecom's participation in the ultra-fast fibre initiative and therefore the uncertainty around whether we structurally separate, a major deal with one technology supplier is just not appropriate right now."

The Tech FMO project was tasked with reviewing operating procedures and the company's vendor relationships in order to cut costs.

A Telecom spokesman said the company had been evaluating its technology supplier relationships for over a year.

"We'll continue to look at them but given the fundamental issues raised by the UFB process, it's not appropriate to be signing any long-term, multi-year supplier deals at the moment," he said.

Havercroft said the three short-listed partners all proposed a form of "uber-deal" which required the company "to hand over certain decision rights and controls and responsibilities to enable the partner to deliver a substantially improved cost of technology".

"With structural separation a possibility and the rapid change our business and industry is going through, this would have meant some big, hairy decisions," said Havercroft. "We all strongly believe that it's our responsibility as an executive team to make those big, hairy decisions about the future state of our company."

Havercroft said the executive had asked the team to cut costs by looking at "hybrid models" - reaching outsourcing agreements for some activities and tightening up existing supplier arrangements.

A standalone team had been created to run the commercial negotiations, which Havercroft admitted had given rise to people in the organisation questioning what was going on.

"But believe me, we've told you what we had when decisions were made or when progress was made," he said.

Telecom shares closed up 1c yesterday at $1.87.


Telecom's old CDMA mobile network is a step closer to switch-off, with the company revealing shut-down dates.

From October 28 Telecom customers using WorldMode CDMA phones for roaming overseas will need to upgrade to the company's XT network.

Telecom's head of network operations, Gemma Roper, said the availability of roaming on XT coupled with the relatively low number of WorldMode customers who have recently used their phones overseas led it to make the decision to close the service.

WorldMode phones will still work locally on the Telecom's CDMA network.

On November 30 Telecom will close the operation of its CDMA EVDO data service, which enables customers to access internet and email from their phones or a data card.

Data would still be available to CDMA customers but not at mobile broadband speeds.

At the end of March 1.696 million of Telecom's 2.291 million mobile customers were on the CDMA network.

Telecom said it would support voice and text services on the CDMA network until the middle of 2012.