MTN, IBM in talks?

By Candice Jones, ITWeb online telecoms editor

Johannesburg, 26 Sept 2008

MTN and IBM are speculated to be in discussions over a possible $2 billion deal - just over R16 billion, at the current exchange rate.

Reports from Indian online Wall Street Journal affiliate, LiveMint, say sources close to the deal have confirmed that MTN has approached IBM for IT support and services, a service the technology company has provided to several Indian telecommunications businesses.

The source says the deal is likely to be signed and delivered by the end of this year, and is reported to include a complete overhaul of MTN's IT systems. However, neither MTN nor IBM would confirm whether any deal discussions are under way.

Responding to a query by ITWeb on the matter, MTN CIO Eric Roberts says: "MTN SA does not comment on market speculation or rumours." IBM's media relations manager for South and Central Africa, Charles Phahlane, responded with the same statement.

IBM and MTN already have a relationship, formed earlier this year. The telecoms giant outsources its information systems division, which looks after its technology services, to the US technology group.

At the time of the deal, MTN said the decision to outsource the division was, among other things, to improve its business performance. IBM has one of the largest outsourcing businesses globally and a revamp of MTN's IT would be a short step from the outsourced components.

IBM has conducted similar overhauls for three Indian telecommunications companies, including a reported $1.4 billion project for the country's largest mobile operator, Bharti Airtel. IBM also manages Bharti's IT infrastructure and reportedly signed a $150 million deal earlier this year to provide an IPTV platform for the company.

MTN and Bharti are also not strangers. A potential merger of MTN and Bharti was called off in May this year, after weeks of discussions. The fallout occurred over proposed structures of the deal, which the companies could not consolidate.

Even before the dust had settled on the failed talks with Bharti, MTN and India's Reliance Communications sat down at the discussion table to thrash out a proposed merger agreement. A raging blood feud between Reliance shareholders, brothers Anil and Mukesh Ambani, prevented the deal from going through.

IBM is also reportedly eyeing a deal with Reliance Communications. The deal with Reliance is said to be valued at $1.5 billion and will involve Reliance outsourcing its IT to the global tech giant.

It is expected to be a 10-year contract and Reliance has reportedly short-listed four companies for the contract - Accenture, EDS, IBM and T-Systems.