Telecom to run Air NZ's global networks

By PETER GRIFFIN telecoms writer

Air New Zealand is to hand over management of its telecommunications and data networks to Telecom in a deal worth $100 million over five years to the telco.

Telecom's Advanced Solutions division, which includes the remnants of the defunct E-solutions business, will take responsibility for the contract and is on the hunt for similar outsourcing business.

General manager of corporate sales Mark O'Donnell said large companies were increasingly keen to divest ownership of their telecoms equipment to outside contractors, instead buying network management on a services model.

While both Telecom and Vodafone supply telecoms service to Air New Zealand, the deal relates to the management and hosting of Air New Zealand's networks on a global scale.

Seven staff will join Telecom from one of Air New Zealand's previous outsourcers and Telecom has agreed to take a collection of telephone exchange boxes, switches and routers off Air New Zealand's hands.

Contractors will service Air New Zealand airport locations around the world. The contractors will be managed from New Zealand.

O'Donnell said deals of such magnitude were thin on the ground and many outsourcing deals, including the Air New Zealand one, did not go out to public tender but were negotiated with existing suppliers.

In July, TelstraClear won the BNZ's telecoms, data and mobile business on the back of a deal Telstra struck with the National Australia Bank. The banks were expected to save A$110 million ($119 million) over a five-year term.

In August, Telecom picked up a sizable outsourcing contract with Tranz Rail.

But the biggest piece of business, said O'Donnell, would be farmed out when dairy giant Fonterra went looking for a major telecoms and data outsourcing partner.

He envisaged that would be at least a year away as Fonterra tackled its communications systems in the wake of shifting the bulk of its operations to Auckland.

"They haven't worked out where they're going to base all their assets yet. These deals are traditionally long sales-cycle deals," he said.

Telecom already supplies services to Fonterra, which also uses international provider Equant for overseas offices. The main IT services players - IBM, EDS and Hewlett Packard - are likely to take a keen interest in winning network management business from Fonterra.

Telecom shares yesterday rose 2c to $4.74, after sinking as low as $4.35 late last year.