BT signs $1.5bn technology deal with Hewlett Packard

BT Group yesterday announced a global partnership with Hewlett-Packard to offer businesses a one-stop shop for information technology and phone services.

Ben Verwaayen, the chief executive of BT, said the alliance made sense against a background of consolidation in the technology and telecoms industries. The move was being characterised as a first step towards closer co-operation between the two companies.

"In a consolidating industry we believe it makes sense to create a strong alliance between a world-class communications company and a global IT company," Mr Verwaayen said.

However, the agreement does not preclude either company from signing other, similar agreements in certain markets or in specific technical areas.

"HP wants to leave itself open to alliances with as many telecoms companies as possible," one analyst said.

BT and HP intend to bundle their expertise in information and communications technology (ICT) to offer services to companies starting in continental Europe and the UK.

Analysts expect the pair ultimately to offer companies the prospect of taking over their entire IT and communications requirements, from desktop computers to fixed-line and mobile telecoms networks.

As a precursor, the two companies also announced yesterday a seven year deal worth $1.5bn (£847m) whereby HP will manage parts of BT's information technology infrastructure in the UK while BT will take over the running of HP's voice and data telecoms network in Europe, the Middle East and Africa. BT will also run HP's customer-support call centres.

The deal is expected to be worth about £125m a year to BT in terms of extra revenues.

The strategic alliance was announced in New York yesterday by Mr Verwaayen and Carly Fiorina, the chief executive of HP. Ms Fiorina said: "Connections matter more than ever today and in a world where business and technology are inextricably linked, bringing together IT and communications into one seamless environment creates a solid foundation for growth."

BT has been growing its ICT business as part of BT Global Services run by Andy Green, its chief executive. It is part of what Mr Verwaayen has dubbed BT's "new wave" of revenue generating businesses as opposed to its legacy operations such as the fixed-line residential business.