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AT&T, T-Systems Strike Oil

Ray Le Maistre
3/31/2008

Oil giant Shell has handed out a series of managed services deals worth billions of dollars as part of a move to outsource most of its communications and networking capabilities, with AT&T Inc. (NYSE: T) and T-Systems International GmbH dividing the spoils. (See AT&T Lands Shell Deal and T-Systems Wins Shell Deal.)

AT&T has won a five-year contract valued at $1.6 billion to manage the global oil firm's networks and communication services, including VOIP, mobile, and remote access services.

The operator, which recently announced a significant investment in its global infrastructure, says it's one of the biggest deals it has ever signed. (See AT&T's $1B Global Capex Pledge and AT&T, NTT Join Subsea Consortium.)

As part of the agreement, AT&T will provide managed services in more than 100 countries, and manage relationships with more than 300 third party suppliers, including suppliers of local access connections. AT&T will also take on 560 Shell staff in the Netherlands, Malaysia, the U.K., and the U.S.

AT&T is battling hard against BT Global Services , Orange Business Services (formerly Equant), and Verizon Enterprise Solutions to win such major network and service management deals, which are becoming more common as large multinationals look to outsource their non-core activities in an effort to cut costs. (See BT Serves Nestle, Verizon Plots Growth, and BT Plans Further Global Push.) Deutsche Telekom AG (NYSE: DT) unit T-Systems, meanwhile, has struck a deal worth about €1 billion ($1.6 billion) to provide global hosting and storage services to Shell. T-Systems will take over and run Shell's global data centers, including three in the Netherlands, one in Malaysia, and one in the U.S., taking on about 900 Shell staff in the process.

As part of the deal, T-Systems will relocate its U.S. headquarters to Houston, Texas.

IT services giant Electronic Data Systems Corp. (EDS) (NYSE: EDS) is the third company being used by Shell. It has landed a five-year, $1 billion deal to provide "end-user computing services including desktop, service desk, on-site services, back-up and disaster recovery, mobile information protection and managed messaging services," the company announced.

— Ray Le Maistre, International News Editor, Light Reading

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