Telecom loses out over Woolworths deal

By PETER GRIFFIN

Telecom has lost out on winning a substantial chunk of business in Australia after Telstra beat it to a five-year contract with Woolworths.

Telstra's win will also force Telecom to hand over its existing business with the retailer, as arch-rival Telstra becomes sole supplier - a bitter pill for Telecom sweetened only by its recent win of a $100 million contract with Air New Zealand.

Telstra will assume responsibility for all of Woolworths' telecoms, data and mobile needs from March, with Woolworths' current suppliers, including Telecom and Vodafone, losing their business with the supermarket retailer.

Both Telecom and second-ranked SingTel Optus bid for the contract, which is understood to be worth hundreds of millions of dollars to Telstra.

Telecom spokesman Andrew Bristol said Australian operation AAPT was a supplier of voice telephone services to Woolworths but that loss of the business would not have a "material impact" on Telecom's revenue.

"We pulled out of the tendering process in October because we couldn't provide the services they wanted. We're not a full-service telco in Australia," he said.

Woolworths said the single-supplier deal would cut telecoms costs and was part of the company's "Project Refresh" programme, which aims to save A$5.1 billion ($5.5 billion) over the eight years to the end of the 2007 financial year.

While refusing to reveal the size of the contract, Telstra said Woolworths would become one of its larger customers as a result. The telco has become increasingly aggressive in pursuing corporate telecoms contracts as competition in the crowded market hots up and Telstra faces a year of sluggish revenue growth.