TELSTRA has landed the Holy Grail of local telecoms contracts, a $1 billion
deal with the Commonwealth Bank to supply managed communication services
over the next 10 years.
The $100 million-a-year deal will see Telstra leverage its internet-based
Next IP and Next G networks to manage and provide telecommunications and
data services for the bank's branches, contact centres, EFTPOS network and
CBA chief information officer Michael Harte said Telstra's track record of
providing reliable and resilient infrastructure placed it at the top of the
pile of bidders, including incumbent supplier Gen-i, Optus and British
"This is critical infrastructure. We want to be on a converged IP network
and want the bandwidth that will carry the rich services that we want to
deliver to our customers," Mr Harte told The Australian.
Telstra's expansive Next IP network will also be leveraged to help CBA
realise its $580 million, four-year program to replace and modernise core
banking systems, some of which date back to the 1960s.
"The key thing is to first transition the bank's existing services across
(from the incumbent supplier)," Telstra Enterprise & Government boss David
Thodey said. "Then we will migrate the bank through its next generation
platforms over the next few years."
The reach of Telstra's Next IP network also played a pivotal role in
securing the win for Telstra, as the CBA was seeking a provider that could
service its network of more than 1000 branches, many of which are located in
The $1 billion contract was put to tender a year ago after Telecom New
Zealand division Gen-i scaled back its dealings with the bank to focus on
"Gen-i were finding it difficult to supply reliable network infrastructure
and they would have loved to retain the business but have opted out," Mr
"It's fair to say that we have higher growth aspirations, that we have a
broader network reach and we have invested in core banking modernisation and
we want to be able to run that real-time across a network without latency
issues and network disruptions. With that growth and that change, Telstra
was the right partner to support that new business."
The $100 million yearly fee could vary greatly, depending on Telstra's
ability to provide services for the bank, Mr Harte said.
"The costs are going to vary from year to year, how much or how little is
made, because there are incentives for Telstra to outperform and there are
penalties in the event that they fall short of their obligations," Mr Harte
Mr Harte declined to outline the performance quotas and penalties that could
apply to Telstra, but said there was the potential for the telco to earn
considerably more as more contracts from the bank's $200 million-a-year
communications budget come up for consideration.
"This (deal) comprises the balance of the $100 million and we will
progressively put out our other communications needs to the market to
determine who the best partner is to supply the other communications
services we require," he said.
The contract win will also give Telstra's Enterprise and Government division
a much-needed injection of new revenue after the division this week lost a
major portion of its seven-year $750 million IT services contract with
Japanese outsourcer Fujitsu is to replace Telstra from June as Qantas's
provider of domestic desktop services, in a deal that is believed to be
worth approximately $50 million a year.
In Telstra's half-year results ending December 2008, its Enterprise and
Government division recorded a 3.9 per cent revenue increase to $2.4