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Telstra takes home $1.1 billion and another 25% of telco market in major Defence deal

by Paris Cowan •
Free resource

A landmark telecommunications deal between Telstra and the Department of Defence has today been revealed to be worth $1.1 billion over 6.5 years.

It is the second major telecommunications outsourcing deal to be signed by one of the Federal Government’s largest agencies in 12 months, and means that a considerable proportion of the Canberra market has now been sealed up for several years into the future.

In June 2012 Telstra was named as the winner of the Department of Human Services’ (DHS) telecommunications outsourcing deal, worth an announced $474 million over its initial period, and $832 million when a transition in period and optional extensions were taken into account.

Between them, Defence and DHS average annual expenditure comprises approximately 50 per cent of the Federal Government market for telecommunications.

According to Intermedium’sICT contract analysis, over the past five years Defence’s annualised market share has been as follows:

  • 30 per cent in 2007-08
  • 33 per cent in 2008-09
  • 22 per cent in 2009-10       
  • 22 per cent in 2010-11       
  • 22 per cent in 2011-12

The deal also means that Telstra will almost certainly rank as the top value ICT supplier to the Federal Government for the second financial year in a row, with the DHS deal pushing it to number one in 2011-12 according to Intermedium’s data.

Averaged out across its full 6.5 year term, what is known by Defence as the Terrestrial Communications contract registers an annual value of just over $169 million, or 94 per cent of its average annual telecommunications spend calculated from past full five financial years (2007-08 to 2011-12).

It was revealed in October last year that Telstra had been down-selected as preferred tenderer for the project, outbidding rival Optus in the process.

The deal will provide the Department with new telecommunications capabilities as well as covering the management and support of its telecommunications operations over the next several years. A transformation of Defence’s network infrastructure is expected to completed by mid-2016.

“This partnership will deliver Defence with robust and secure information communications technology, while creating greater efficiencies and lower costs.  

“The project includes a major transformation program of work and the ongoing sustainment of Defence’s telecommunications environment,” new Defence CIO Dr Peter Lawrence said in a statement.

Telstra will boost its workforce by about 350 personnel in order to meet its Defence obligations, said CEO David Thodey.

The deal also means that Telstra now holds two out of the three biggest telecommunications deals in the Federal Government. Rival Optus is the incumbent outsourcer at the Australian Taxation Office under a contract very recently boosted in value by $94 million to be worth $311 million out to 31 March 2015.

View Department of Defence profile in GovFacts >>>

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Telstra named as preferred tenderer for Defence Terrestrial Comms

Telstra and Optus do battle over major Defence contract

Updated: Greg Farr to finish up as Defence CIO


For more information, please contact the Editor (02) 9955 9896.

  • Federal
  • Telecommunications
  • Defence
  • Australian Taxation Office (ATO)
  • David Thodey
  • Department of Defence
  • Department of Human Services (DHS)
  • ICT Outsourcing
  • Optus
  • Peter Lawrence
  • Terrestrial Communications
  • Tesltra