Telecom hunting new purchases

By PAUL BRISLEN

Just days after buying Eric Watson's IT services firm Gen-i for $62.5 million, Telecom is scouting for similar buys.

A Telecom source said the company saw plenty of opportunities to help consolidate New Zealand's IT services sector.

Gen-i will be merged with Telecom Advanced Solutions, but it will retain the Gen-i branding.

Telecom chief information officer Mark Ratcliffe will hold the reins. The new division will have about 1200 staff.

"To put it bluntly, the more people we have the more money we make because in effect we're selling their time and services," he said.

Ratcliffe would not comment on future purchases, saying the purchase of Gen-i was not yet complete.

No layoffs are planned and Gen-i managing director Garth Biggs and Advanced Solutions head Chris Quin will stay on for the foreseeable future. Both will report to Ratcliffe.

"We aren't in any rush with the integration, we're not working to a deadline so we'll just merge the two together at a pace that suits."

Gen-i reported earnings before interest, tax, depreciation and amortisation of $7 million for the year to April 30 on revenue of $155 million.

Advanced Solutions is by far the smaller of the two units with revenue of $39 million for the first three-quarters of the year.

Ratcliffe expected the combined company to pitch for business in both New Zealand and Australia.

"We're probably No 2 in the market behind EDS but really it's very close. The numbers are very similar."

TelstraClear was rumoured to be in the market for Gen-i, but chief executive Rosemary Howard said the price was too rich.

"We also weren't keen on some of the non-price-related terms and conditions."

TelstraClear was still interested in acquiring local companies within the sector, said Howard, but was also increasing internal resources.

"We're working through three areas - growing organically, working with partners and of course acquisitions."

Gen-i was originally part of the Wang Corporation. However, when the US parent company was placed in Chapter 11 protection, the local arm found it difficult to secure long-term business because of the confusion over its status.

Eric Watson's Cullen Investments bought into Gen-i in 1999, as part of the purchase of 60 per cent of Blue Star Business Solutions. By September, Cullen had bought the remaining 40 per cent and the company began to reshape its fortunes.

Advanced Solutions grew out of the merger of an internal Telecom team and esolutions, its "virtual alliance" with Microsoft and EDS.

It is thought Cullen Investments will use the money to shore up Powerhouse, the British retailer that Pacific Retail Group - 77 per cent owned by Cullen - bought last year.


Gen-i

* Formerly Wang New Zealand

* Employs 716 people in NZ and Australia

* Offers IT services, focusing on design, implementation and support of business systems

* Customers include Air NZ, Ravensdown, IAG, Fonterra

* Forecast revenue (year to April 2005): $160m-$170m

* Forecast earnings: $11m

* Now part of Telecom Advanced Solutions, Telecom's information and communications technology unit