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February 11, 1999


By CBR Staff Writer

After months of rumor and speculation, Electronic Data Systems and MCI WorldCom yesterday confirmed details of a $17.5bn deal that will see MCI sell its services unit to EDS in return for running the bulk of the services giant’s datacoms and telecoms related business. Rumors of the tie up first started circulating in December when the duo were reported to be in talks to set up a joint venture. Under the multi-part deal, EDS said it will buy MCI’s Systemhouse IT services unit for $1.65bn and integrate the group’s 120 offices worldwide, employing around 12,000 staff, into its infrastructure. As a result of the acquisition of Ottawa-based Systemhouse, which recorded $1.7bn in revenue for 1998, EDS will become one of the largest IT services providers in Canada, the company said in an official statement. And in what amounts to one of the largest outsourcing deals in the telecoms sector, MCI will hand over the majority of its IT services to EDS, including the bulk of its applications development, maintenance agreements and infrastructure services in a 10-year agreement valued at between $5bn and $7bn. For its part, the Plano, Texas-based EDS, the second largest services company in the world, will outsource the lion’s share of its global network to MCI, with the communications giant becoming responsible for the management of voice and datacoms services both for EDS itself and its customers. The deal is expected to generate between $6bn and $8.5bn for MCI over the next 10 years and 1,000 EDS employees will be invited to join the carrier as part of the agreement. The two companies also say that they will work together to develop network service offerings aimed at business and government users worldwide from here on in. The deal closely mirrors aspects of an agreement signed between AT&T and IBM last Septembe. Under that deal, AT&T purchased IBM’s global communications network, for $5bn, and at the same time handed over management of its applications processing and data center operations to IBM services division in a 10-year, $4bn deal. á

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