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Reuters: 1-T-Systems lands 5-yr, 1 bln-euro Shell contract

Mon Mar 31, 2008 8:18am EDT

FRANKFURT, March 31 (Reuters) – Deutsche Telekom (DTEGn.DE: Quote, Profile, Research) said on Monday its business client unit T-Systems has won an information technology contract from Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research) worth 1 billion euros ($1.58 billion) over five years.

T-Systems, which this month announced an alliance with U.S. IT services provider Cognizant (CTSH.O: Quote, Profile, Research), said the deal was the biggest in its history and would increase revenue from abroad by more than 20 percent.

Last year, T-System had sales of 12 billion euros, of which 2.5 billion euros were generated outside of Germany.

It said it had the option to extend the contract with Shell for global hosting and storage services after five years.

Deutsche Telekom stock was down 2.4 percent at 10.46 euros at 1125 GMT, in line with the DJ Stoxx telecoms index .

Shell signed two more five-year outsourcing deals on Monday, one with U.S. telecoms group AT&T (T.N: Quote, Profile, Research) for $1.6 billion and one with Electronic Data System Corp EDS (EDS.N: Quote, Profile, Research) for $1 billion.

In December, Shell said it wanted to outsource a substantial part of its information technology operations to cut costs, and that it was in talks with three companies.

T-Systems said it will take over the infrastructure and organisation of IT professionals at Shell’s global data centres, including three in the Netherlands and one each in the United States and Malaysia.

It also plans to move its U.S. headquarters to Houston, Texas, from Lisle, Illinois, and make Malaysia a centre for service management, turning the data set-up there into its operational hub for Asia-Pacific.

T-Systems is Deutsche Telekom’s smallest and least profitable unit.

The business provides IT and telecoms services for companies such as carmakers BMW (BMWG.DE: Quote, Profile, Research), Daimler (DAIGn.DE: Quote, Profile, Research) and Volkswagen (VOWG.DE: Quote, Profile, Research), as well as for German federal and municipal governments and European public administrations.

Last March, Deutsche Telekom said it was looking for an international company to buy into T-Systems but, in the course of the year, said it was seeking a partner only for the systems integration part of the business.

(Reporting by Nicola Leske; Editing by David Hulmes)

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