The payment -- part of the deal which also sees IBM purchase Telstra's 22.6 percent stake in Big Blue's Global Services Australia operation for AU$153.5 million and Lend Lease's 23 percent stake for AU$160 million -- is designed to allow the carrier to secure "increased flexibility" across its massive information technology operation for the remainder of the deal, an official said.
IBM GSA's 10-year outsourcing agreement with Telstra expires in 2007.
The deal significantly reduces the up-front cost to IBM of the Telstra GSA stake acquisition. However, IBM will pay rebates back to Telstra linked to the volume of the carrier's spend with Big Blue over the next four years, the spokesperson said.
"They've clearly told the market they want to reduce information technology costs," the spokesperson said. "We're sticking with them as the going gets tough".
Telstra's chief information officer, Jeff Smith, is widely tipped to be looking at outsourcing some of the carrier's information technology operations to India in a bid to reduce its annual technology bill.
The IBM spokesperson confirmed that the enhanced flexibility encompassed Telstra's entire information technology operation. However, he stressed that Big Blue retained Telstra's outsourcing contract -- which encompasses the provision of outsourcing services and management of the carrier's data centres.
Telstra officials declined to comment. However, the carrier's annual results document, released this morning, noted that, as part of the GSA deal, "We also modified a 10-year contract with IBM GSA to provide information technology services.
"This modification will result in an expense of AU$130 million being recorded in our fiscal 2004 statement of financial performance and the removal of AU$1,596 million of expenditure commitments disclosed as at 30 June 2003".
The IBM spokesperson stressed that Telstra had been a customer of Big Blue for 20 years and said "We've both discovered that over the six years we've been involved in the joint venture that we didn't need to have equity in order to be partners".
He stressed that the publicly disclosed worth of the acquisitions made by IBM in Australia over the past 12 months totalled more than AU$500 million, which was a "significant expression of confidence in the local market and local services business".
The combination of the Business Consulting Services and Business Innovation Services units would create Australia's largest business consulting practice, he said.
