Telecom eyeing up Gen-i

By ADAM GIFFORD

Eric Watson may soon have more cash in his back pocket for his plunge into the British retail market, with strong indications his Cullen Investments is about to sell IT services company Gen-i to Telecom.

Technically, Gen-i has always been available for sale, but none of the past suitors have been prepared to meet Cullen's price.

But now Telecom and TelstraClear are interested, leading to the kind of auction investment companies crave.

Cullen director and Gen-i chairman Maurice Kidd said Cullen did get approached about assets by potential buyers.

"We comment on deals when the ink is dried. We have not got a signed agreement," Kidd said.

Herald sources say Telecom Advanced Solutions has had a large team in Gen-i doing due diligence.

While past speculation on a possible suitor has centred around vendors such as IBM and Hewlett-Packard looking to grow their services businesses, the emergence of the telcos is an indication of the convergence between telecommunications and IT.

In its just-released survey of the New Zealand IT services market last year, research firm International Data Corporation put Telecom Advanced Solutions at number two behind EDS, mainly because it won half of the total spend for network management and 25 per cent of the market for network consulting and integration.

Gen-i came seventh overall, with strengths in network and desktop management, application management, custom development and systems integration.

Market watchers say the telcos would pay more than the hardware vendors for Gen-i's skills and blue-ribbon customer base, and the price could go as high as $80 million.

Gen-i turns over more than $150 million from its activities on both sides of the Tasman and has about 700 staff.

IDC analyst Graeme Muller said Gen-i had a good year last year, with highlights being winning a $50 million, four-year outsourcing contract with insurance company IAG New Zealand and a $2 million a year applications support contract with Air New Zealand - ousting a former Watson-linked company, Provenco.

Cullen is shedding New Zealand assets as Pacific Retail Group, in which it holds a 77 per cent stake, tries to build up British retail chain PowerHouse. Training company Auldhouse is also in Cullen's IT portfolio.