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Tuesday, December 8, 1998 Published at 17:18 GMT

Business: The Company File

AT&T buys IBM's Global Network

AT&T has agreed to buy IBM's Global Network corporate networking business for $5bn (£3bn) in cash.

The acquisition will fill an important gap in AT&T's ability to supply business customers with data services and Internet access.

[ image: IBM's Gobal Network business has more than 1m users]
IBM's Gobal Network business has more than 1m users
AT&T chairman Michael Armstrong said the agreement was "all about...growth in revenue, growth in technology and, most important, growth in what AT&T can do for customers."

By providing customers with more attractive global services the acquisition would enable AT&T to compete more effectively in providing global managed data network services, including IP, he said.

IBM chairman Louis Gerstner said: "We are delighted that AT&T will be the new home for our Global Network operation.

"With this agreement, the network will receive the management focus and resources necessary to maintain its standing as a world-class provider of connectivity to IBM and millions of customers."

The deal means IBM will no longer compete in this area against AT&T's own data networking business, AT&T Solutions.

Reciprocal deals

As part of the deal, IBM has granted AT&T a five-year $5bn contract to handle much of its networking needs, while AT&T has outsourced some of its applications processing and data management work to IBM.

IBM will handle billing and installation for AT&T's long-distance customers in a 10-year deal valued at $4bn.

IBM will also assume management of AT&T's data processing centres, which operate corporate information systems such as employee payrolls.

Under the agreements, more than 2,000 AT&T management employees will be offered positions with IBM.

Some 5,000 IBM employees will join AT&T as part of the Global Network sale which the companies expect to complete by the middle of next year following approval by US and foreign regulators.

AT&T said earnings dilution in the first year would be insignificant. IBM said it did not expect the deal to have a significant impact on 1999 operating results.

IBM was looking to sell the Global Network business, which serves around 35,000 corporate customers in 900 cities in more than 100 countries and provides over 1m users in 59 countries with Internet access.

IBM first entered the global networking business in 1981 to provide multinational companies with global data links.

Since then, many telecommunications firms, including AT&T have entered the global networking business.

AT&T also has a deal pending to acquire cable television company Tele-Communications, valued at $48bn and it has agreed a $10bn partnership with BT.

AT&T said the current agreement would not interfere with its 100-city network to be created as part of its joint venture with BT.

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