AT&T Win: AT&T Awards IBM Two Outsourcing Contracts Valued at $4 Billion, as Part of Its $5 Billion Acquisition of IBM's Global Network Business - Company Business and Marketing

EDGE, On & About AT&T, Dec 14, 1998

AT&T Corp. has announced two outsourcing contracts with IBM, valued at $4 billion, as part of its strategic agreement to acquire IBM's Global Network Business for $5 billion in cash. Expected to close by mid-1999, the total deal value is estimated at $9-10 billion. The acquisition could bring $2.5 billion in additional revenue to AT&T in the first full year of operation. The international law firm Milbank, Tweed, Hadley & McCloy represented AT&T in negotiating and structuring the two outsourcing contracts.

Commenting on the transaction, Daniel R. Mummery, a partner in Milbank's Global Technology Transactions Group stated, "The strategic agreements are mutually beneficial as they capitalize on the companies' respective strengths and focus on growth. AT&T will concentrate on networking and IBM will provide business applications for networked companies. Valued at $4 billion over the next ten years, the two outsourcing contracts are in accord with AT&T's latest push to expand beyond its traditional long-distance customer base, allowing AT&T to focus on its goal to become a dominant provider of communications using Internet technology to transmit data."

The two outsourcing arrangements contemplate that:

o IBM will manage certain of AT&T's legacy applications processing, including billing, service-order-processing, installation and maintenance, for customers of AT&T business long-distance services.

o IBM will assume management of AT&T's data processing centers, which operate corporate information systems such as accounts payable and receivable and employee payroll and benefits.

In connection with the transaction, more than 2,000 AT&T management employees will be offered positions with IBM.

The Milbank team was led by partner Daniel R. Mummery and associates David M. Hudanish, Doreen Sullivan, Robert M. Finkel, Stephen D. Nordahl, Kevin P. Smith, Janet K. Titus-Parkhurst, William J. Peters and Jessica Magaldi.

Milbank, Tweed, Hadley & McCloy is a premier international law firm, with offices in New York, Washington, D.C., Los Angeles, London, Moscow, Tokyo, Hong Kong and Singapore. Within the last several years, Milbank Tweed's Global Technology Transactions Group has represented a wide variety of corporate clients in structuring many of the largest and most complex outsourcing agreements and technology strategic alliance transactions worldwide. In addition to its preeminence in outsourcing, Milbank's Global Technology Transactions Group is on the cutting edge of the emerging trend of Business Process Outsourcing.