IBM walks away from £870m T-Systems mainframe deal amid competition concerns

The proposed buy of T-Systems' mainframe unit by IBM has withered amid competition concerns from the German cartel office.

The reportedly €860m (£870m/$975m) agreement first emerged in mid-January. T-Systems told us it was not selling the unit, although some 400 employees were expected to transfer to Big Blue. The German competition regulator described the thing as an acquisition.

However, the integrator, a division of Deutsche Telekom, claimed it would continue to "offer" services and "supply" them to customers with IBM providing a "share of services".

The Bundeskartellamt – the authority that already delayed the deal – said today that IBM has "withdrawn its notification of plans to acquire essential hard and software as well as personnel from the mainframe service business of T-Systems International".

The regulator added that it had made it clear to both businesses that there were "preliminary competition concerns" about the buy, as well as the "connected outsourcing cooperation".

Bundeskartellamt president Andreas Mundt said mainframe services remained a huge market worth billions of dollars despite the growing trend of sending data to the cloud.

"According to our preliminary assessment IBM holds a dominant position here in the European Economic Area which would have been further strengthened by acquiring personnel and essential infrastructure from its competitor T-Systems," he said.

Bundeskartellamt said the agreement did not include IBM taking over existing customer contracts.

Adel Al-Saleh, CEO at T-Systems, told Reuters today: "We are exploring other alternatives how we get latest technology and solutions to our clients."

T-Systems has been in restructuring mode in the past year, reducing its footprint of 100 cities to 10, and cutting the 37,000-strong workforce by 10,000 in 2019. The tie-up of the mainframe division was believed to be part of this get-better plan.

IBM had not responded to our request for comment. ®