BT Wins $1B VPN Deal

BT Group plc (NYSE: BTY; London: BTA) has beaten out Cable & Wireless plc (NYSE: CWP) and Electronic Data Systems Corp. (EDS) to win a seven-year U.K. government contract worth $1 billion.

The £530 million (US$1,002 million) contract will see BT set up and run a national IP network, called N3, that will provide 18,000 National Health Service (NHS) buildings with broadband links to a national backbone.

BT has been jointly providing, with C&W, the current NHS network, but that hooked up just 10,000 locations, and not all with broadband connections.

BT, which has already picked up some lucrative IT-based contracts from the NHS, had been the favorite to win the deal (see Trio Battle for Monster UK VPN and BT Wins Big IT Deals). Now it needs to award some contracts of its own for equipment and services. BT will need to furnish the health service with the required IP kit, with Cisco Systems Inc. (Nasdaq: CSCO), a BT partner, looking well placed to cash in (see BT, Cisco Team on IP in Europe).

In addition, BT will be required to use service partners to link the health service sites. The NHS deal requires BT to act as a services integrator, sub-contracting various network operators on a competitive basis to provide local and long-haul connections.

"We haven't signed any contracts yet. But it will involve a top team of suppliers, with contracts awarded on a horses for courses [best of breed] basis," says a BT spokesman.

BT's share price was up slightly, by 1.5 pence to 176.5 pence, on the London Stock Exchange this morning.

— Ray Le Maistre, International Editor, Boardwatch

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