Telenor and EDB Business Partner have entered into one of the largest IT agreements in the Nordic region. The agreement involves Telenor transferring an extended responsibility for the operation of IT systems to EDB. In addition EDB will take over operational responsibility for Telenor's external customers in this area. The agreement runs for seven years and will significantly increase the companies' competitiveness. For EDB the agreement is expected to be worth NOK 5.3 billion. In addition EDB will sell the bulk of its Telekom business area to Accenture for NOK 400 million. At the same time, Telenor has entered into a cooperation agreement with Accenture regarding the purchase of application services. For Telenor these agreements will over time yield annual cost reductions of approximately NOK 250 - 350 million.
“Primarily the agreements are important to reduce costs and create a simpler and more focussed Telenor and specialising our operations. We are also excited about the opportunities for innovation that are created through a stronger strategic cooperation between three large ICT companies – Telenor, EDB and Accenture,” says Jon Frederik Baksaas, President and CEO at Telenor.
“EDB is strengthening its position as the leader in IT operating services in the Nordic region, achieving enormous economies of scale and becoming the largest company for distributed operations in the Nordic region. We are building expertise, which will enable us to meet our global competitors with significantly greater force. At the same time we will gain experience with large consolidation projects, which will assist us in our competition for large, new contracts which the market is expecting,” says Endre Rangnes, CEO at EDB.
The main points of the agreement signed by the two companies Tuesday 25 March 2004 are as follows:
* Telenor will sell the bulk of its Operating services division to EDB for net NOK 132 million after restructuring costs. The sale means the transfer of 470 employees from Telenor to EDB on 1 May.
* Telenor will extend and expand its operating agreement with EDB until 1 May 2011. The contract is estimated to be worth NOK 4.5 billion, of which NOK 3.7 million are new revenues for EDB.
* EDB will take over operating contracts with 26 customers in commerce, industry and the public sector from Telenor. The contracts are expected to be worth approximately NOK 800 million.
* In the future EDB shall be Telenor’s preferred operating partner for all of its Nordic operations.
* EDB will sell the bulk of its Telekom business area to Accenture for NOK 400 million. The sale means that 360 employees will change employment from EDB to Accenture on 1 May.
* Telenor will enter into an agreement regarding the purchase of application services from Accenture.
* Accenture will have EDB as its preferred partner on operating services in the Nordic region.
* Telenor and EDB will jointly conclude the negotiations with international technology suppliers regarding a framework agreement for procurements.
Telenor will be simpler, more flexible and more focussed
By signing the agreements Telenor is taking a step further towards creating a simpler and more focussed organisation. “The agreements will make the group’s operations more efficient, allowing us to realise significant cost reductions. Now, to an increasing extent, we can focus IT resources on strategic control and on exploiting IT to further strengthen our competitiveness. Telenor also gains access to a larger field of expertise with incentives to challenge operative and strategic IT use. At the same time Telenor will be a demanding customer to suppliers of IT solutions. Combined, this increases the group’s ability to innovate,” says Jon Frederik Baksaas.
EDB strengthens its market position and increases its competitiveness
For EDB these agreements mean a strengthening of the group’s competitiveness and opportunities for growth in the Nordic market. Once the transactions are completed EDB will be able to compete for the biggest Nordic contracts. The agreement means that EDB will increase its revenues from IT operations by NOK 400 million in 2004. The group will receive a significant boost in terms of capacity and expertise, allowing it to compete for large operating contracts which the market expects to see in the future.
EDB will be the largest distributed operations company in the Nordic region and will be responsible for over 55,000 jobs and will greatly strengthen its position in operating UNIX/NT platforms. By consolidating and coordinating servers and equipment, EDB will establish experience and expertise to be used for further growth in the Nordic region. By transferring operating contracts with external customers from Telenor, EDB will strengthen its position in commerce, industry and the public sector, which is an important area of commitment for the group. By being a preferred operating partner for Telenor and Accenture in the Nordic region the foundations are also laid for increased growth outside Norway.
The agreements between Telenor and EDB form the basis for efficiency measures that are prerequisites so that both companies can realise the cost reductions required by the agreement. These will cover personnel, premises and purchasing of hardware, software, etc.
Strong Norwegian professional environment for application development at Fornebu
Through the sale of parts of its operations in the Telekom business area to Accenture and at the same time entering into a long-term cooperative agreement with Telenor, a strong professional environment will be established. For both EDB and Telenor this means that the values created through a long-term cooperation will be given access to a global market.
For Accenture, today’s announcement means an important step further in the long term, strategic co-operation with Telenor.
“We are very pleased that Telenor and Accenture’s year-long co-operation in developing solutions for the telecommunications market, now will be developed further,” says Nils Øveraas, partner and managing director of Accenture in Norway. “In addition, the agreement with EDB Business Partner will enable us to efficiently deliver integrated outsourcing services to major businesses in the Nordic market. With Telenor as leading telecommunications operator, and EDB Business Partner as one of the strongest suppliers of services and software in the Nordic region, we believe this three-way strategic partnership will create substantial value for our clients,” says Nils Øveraas.
Economic and financial consequences
The agreement between EDB and Telenor involves EDB acquiring the bulk of the division Driftstjenester (operating services) for net NOK 132 million, after Telenor has covered restructuring expences of NOK 50 million. Telenor will receive a convertible two-year loan corresponding to the acquisition amount. EDB will take over the tangible and intangible assets from Telenor for approximately NOK 330 million, making provisions of NOK 130 million for further restructuring. Through the transfer EDB will increase its revenues by approximately NOK 400 million for the remainder of 2004, and by approximately NOK 500 million in 2005. The total value of the agreement is NOK 5.3 billion over a seven year period, of which NOK 4.5 billion is from the agreement with Telenor and NOK 800 million from agreements from external customers transferred to EDB.
The agreement between EDB and Accenture involves EDB selling the bulk of its Telekom business area for NOK 400 million. NOK 100 million is due at the time of settlement and the remaining amount will be due in the second half of 2004. EDB expects to enter a gain on the sale of approximately NOK 300 million. The sale means that the Telekom business area will have total revenues of approximately NOK 330-350 million in 2004, which encompasses full activity in one quarter and reduces activity due to the sale in the three last quarters.
To editorial offices:
Press and analyst conference
In connection with the agreement a press and analyst conference will be held in auditorium A at Telenor Expo visitor centre at Fornebu at 9:30 am on Friday 26 March 2004. Jon Fredrik Baksaas, President and CEO at Telenor and Endre Rangnes, CEO at EDB will provide information about the agreement.
NB: The presentation will be given in Norwegian.
The press conference will be broadcast directly over the Internet, please see:
. A recording of the conference will be available at the same location.
Pictures and illustration material may also be found at:
Dag Melgaard, Chief Press Spokesman, tel.: (+47) 67 89 26 71 or (+47) 90 19 20 00
Reidar Gjærum, Executive Vice President, tel.: (+47) 22 77 21 05 or (+47) 90 85 51 01
Alex Pachetti, Global Media Relations, tel (+1) 917 452 5519