Optus signs $530 million ANZ contract

Singapore Telecommunications (ASX: SGT) subsidiary Optus announced yesterday that it had secured a deal with banking giant ANZ (ASX: ANZ) worth up to $530 million over five years.

The $100 million per year contract differs from both the Commonwealth Bank (ASX: CBA) and Westpac’s (ASX: WBC) technology-driven strategies moving forward. Optus’ new contract is an extension of the previous $500 million contract signed in 2009 that it snapped up from Telstra (ASX: TLS). The contract will include managed network services and voice and data connections to the banks 30,000 plus staff throughout Australia, New Zealand, Asia and the Pacific.

Signing the contract represents a big commitment for ANZ and SingTel’s presence in Asian markets could have weighed in on the decision to award it the contract. CEO Mike Smith said, “This agreement represents ANZ’s largest managed services relationship and we are very pleased to continue our partnership with SingTel for a further five years”.

ANZ’s ‘Super Regional Strategy’ aims to generate 25%-30% of revenues from Asian markets by 2017. This is starkly different from both the CBA and Westpac who currently draw more than 95% from Australian and New Zealand markets.

However, both companies have acknowledged the threats from not responding to increasing presence of technology in banking and financial markets — both in retail and business banking. In 2012, Commonwealth claimed its $1.1 billion systems upgrade would be “world-leading” and leave Australian competitors in its wake.

Despite its reluctance to upgrade its ‘core’ banking platform, Westpac has conceded that it will need to eventually however its current technology focus is on other areas of the business. Westpac CIO Clive Whincup recently told The Australian Financial Review that the country’s second biggest bank will transform its online presence, build infrastructure required for its Asian strategy and change its core investment platform used in its BT Wealth division.

Foolish takeaway

As more and more people utilise online purchases and web banking, Australia’s big four are feeling the pressure from overseas online technology giants like PayPal. It’s important that companies, not just banks, embrace technology and use it to their advantage, otherwise they risk being left behind.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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