AT&T Corp. picked up IBM Corp.’s Global Network division last month for US$5 billion.
Getting IBM’s facilities-based network, which had been on the block for several months, is key to AT&T’s future growth plans, said C. Michael Armstrong, AT&T’s chairman and CEO.
“It will accelerate our ability to offer IP-based services to global customers,” he said. “It will make us more competitive with some very strong rivals out there and it will support our plans to create a 100-city IP network as part of our global joint venture with British Telecom.”
In Canada, IBM doesn’t own the network infrastructure for its Global Network services. Instead, it leases the network from Bell Canada and Telus.
IBM Canada Ltd. spokesperson Anne Hay said the company is still assessing how the deal will affect the Canadian Global Network business.
“From a Canadian perspective, we really don’t know how this will impact our operations and employees,” she said. However, Hay noted IBM will continue to honour its existing arrangements with Bell Canada and Telus.
IBM’s network connects the offices of hundreds of global companies in 850 cities spread throughout 59 countries.
IBM CEO and chairman Louis V. Gerstner said his company sold the network because of a change in strategy.
The network was originally built in the early 1980s when IBM needed to move data across international borders, Gerstner explained.
“If you looked at the telco infrastructure at that time it was for the most part analogue not digital, voice not data, and it was local not global.”
Today, however, with most major telcos building IP-based digital networks around the world, it doesn’t make sense for IBM to continue investing in network technology, Gerstner said.
The deal also involves AT&T and IBM entering into outsourcing contracts with one another. AT&T will serve IBM’s global networking needs, while IBM will manage AT&T’s business application processing and data centre operations.
In addition, approximately 5,000 IBM employees will join AT&T.