AT&T returning through IBM global purchase

By CHRIS BARTON

The United States telecommunications giant AT&T looks poised to re-establish a direct presence in New Zealand through its $US5 billion cash purchase of IBM's global communications network.

The deal is likely to affect 20 IBM New Zealand employees who run the local arm of the IBM Global Network which carries information and provides Internet access for some 4000 New Zealand business customers.

As part of the sale, about 5000 IBM employees worldwide will join AT&T, while 2000 AT&T managers will be offered jobs with IBM, which will run AT&T's data-processing centres. No redundancies are anticipated.

Although AT&T has provided services in New Zealand since the early 1940s in conjunction with Telecom (then the New Zealand Post Office), it currently runs its New Zealand services from Australia and through partnerships with both Clear and Telecom.

The AT&T direct presence in New Zealand ended as a result of the company's "trivestiture" in 1996 when it spun off its NCR computing division and equipment division which became Lucent Technologies.

The sale also provides for AT&T to become IBM's main phone-service provider, while IBM will manage AT&T's payroll, benefits and customer orders for 10 years in an agreement valued at $US4 billion.

AT&T also gets a $US5 billion, five-year outsourcing contract to handle a large portion of IBM's networking needs.

AT&T chairman Michael Armstrong, who has boosted earnings by cutting more than 15,000 jobs, is expanding the data business to offset less-profitable phone services.

IBM is shedding the expense of maintaining a telecommunications network to concentrate on managing other companies' computer systems.

"The acquisition of IBM's global data network will accelerate our ability to deliver [Internet]-based services to global customers," Mr Armstrong said.

The IBM network has more than 1300 dial-up points of presence and provides access from more than 850 cities in 59 countries.

The companies expect to complete the sale by mid-1999, after approval by US regulators and authorities outside the US.

AT&T outbid competitors including GTE and SBC Communications.

The purchase will help AT&T's future alliance with British Telecommunications by giving the companies an Internet-based network in 93 of the 100 cities they are targeting.

The AT&T-BT venture will offer voice, data and Internet services to large corporations around the world.

IBM plans to use the $5 billion in proceeds for research and development, acquisitions and to buy back shares.

It doesn't expect the sale to have a "significant impact" on its 1999 results.

AT&T has made several acquisitions under Mr Armstrong. It agreed to buy Tele-Communications, the No. 2 US cable company, for $US49.5 billion and cellular-phone provider Vanguard Cellular Systems for $US1.5 billion.