Bad News for Vendors

6:00 AM -- Vendors might want to look away now. The procurement joint venture between European network operator giants Deutsche Telekom AG (NYSE: DT) and Orange (NYSE: FTE) (Orange) will open its doors on Monday Oct. 17 and the savings targets look good for the carriers and bad for the supplier community.

The venture, first announced in April and called BUYIN, is set to save the duo €1.3 billion (US$1.8 billion) per year after three years of operation, with Deutsche Telekom expected to cut its annual outgoings by around €400 million ($552 million) and its French partner set to save up to €900 million ($1.24 billion) per year. (See FT, DT Form Procurement JV.)

The joint venture, to be run by DT's former Head of Procurement Volker Pyrtek, will purchase "terminal devices, mobile communications networks" and "significant portions of their fixed-network equipment and service platforms." The two operators are also looking at the possibility of handing over some of their Service Provider Information Technology (SPIT) purchasing to the joint venture, making the market tougher for an even larger number of suppliers, while the German authorities are still looking at whether further fixed-network components can legally be included in BUYIN's shopping list.

Taken as a proportion of overall global equipment spend by the major carriers, which runs to about $300 billion a year, the annual savings account for just 0.6 percent of the worldwide total. But that's still $1.8 billion less going out of DT and Orange's bank accounts and into those of its suppliers, with the prospect of further savings to come.

Of course the likely outcome is that the larger vendors will probably gain an even greater share of the overall spending by these two international giants, while specialist suppliers might find it harder to get a foot in the door, and ultimately that's not a positive trend for industry innovation and the supplier ecosystem.

Meanwhile, Pyrtek can expect to have his name added to a lot more Christmas card lists this year…

— Ray Le Maistre, International Managing Editor, Light Reading

percosan 12/5/2012 | 4:51:12 PM
re: Bad News for Vendors

Seems that there would be anti-trust issues here. In addition, talk about poisoning the innovation pool.

Well done guys.


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