Telstra burns Senetas

After almost 10 years service, contract cancelled with just 30 days notice

Despite announcing almost a year ago that it was signing a bulk ICT services contract with EDS and Infosys, Telstra (ASX:TLS) has waited until today to officially axe local supplier Senatas.

The ASX-listed services provider (ASX:SEN) has supplied application development and production, maintenance and support services to the telco for close to ten years.

It is understood that while Telstra had notified suppliers a year ago that Infosys and EDS would take over, the telco has to date declined to give its local suppliers a date at which their contracts would be cancelled.

Instead, the telco has preferred to keep suppliers on until a point at which Infosys had developed the capability to take over the specialised services. Upon reaching that point, local suppliers are given just one month’s notice of the cancellation of their contract.

Senatas CFO, Andrew Wilson, said Telstra’s business practices had put the company in a difficult position, having to provide a high staff and service level without the certainty of knowing when their contract would end.

“We were continuing to provide services despite Telstra’s announcement [in June] about services that it may have been handing over to Infosys,” he said. “We were hopeful that we would be able to continue providing services beyond 30 June but that is unfortunately not the case.

“It has made our life quite difficult. We were delivering services well beyond their [9 June] announcement date, and they certainly didn’t advise us of any impact on our contract of that time. They have only just advised us today."

Telstra first announced its awarding of an expanded application development and maintenance services contracts to EDS and Infosys on 9 June 2009 as part of its IT transformation program.

The agreements at the time of signing was expected to be worth $450m over five years.

Wilson said that the loss of the Telstra business would be worth about $3 million and represented about one third of the company’s consulting business revenues.

He was unable to provide staffing numbers, but said about one third of the company’s consulting staff would be affected by the contract’s cancellation.

“We will be tendering for business intelligence jobs around the Australia and hopefully redeploy the staff affected,” he said. “We have other initiatives in the consulting, and other divisions which should hopefully help us make up the shortfall.”

Wilson said that the company would re-tender for Telstra’s business in the future should the opportunity arise.

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Tags TelstraedsSenetasInfosys Technologies

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