BT and C&W to scrap for £700m NHS broadband deal

BT and Cable & Wireless have been left to fight for the £700m NHS 'N3' broadband network - one of the key infrastructure components of the £5bn health service modernisation programme - following EDS's withdrawal from the bidding.

The announcement is good news for NHS IT director general Richard Granger, with the N3 contract now set to be awarded by mid-February - more than a month ahead of schedule. But it leaves EDS with nothing to show for all its NHS IT bids and caps a bad week that saw its share price hit after another set of disappointing results.

Reports suggest that Granger's last minute decision to include voice as well as data transmission in the broadband contract was behind EDS' decision to pull out, although a spokesman for the National Programme for IT (NPfIT) in the NHS would not comment.

"We were advised yesterday, Thursday 5 February 2004, by EDS that they wish to withdraw from the procurement. The NPfIT wishes to take this opportunity to thank EDS for their participation in the programme," was all he would say.

That won't go down well at EDS' Texas headquarters, with the company announcing a net loss of $354m in the fourth quarter ended 31 December 2003 - due largely to writing down $559m of deferred costs of the US Navy Marine Corps Intranet contract. And although total revenues rose, European revenues showed a slight dip and contract signings almost halved from $8.1bn for the same period in the previous year to $4.3bn.

Anthony Miller, an analyst at Ovum Holway, said the results make "grim reading", despite EDS chairman and CEO Michael H Jordan predicting an "uptick" in IT services spending during the second half of 2004.

"Is there anyone in Plano not wearing rose-tinted specs? There is absolutely nothing in these results that gives any indication that EDS is not in for another 'challenging' year," said Miller.

EDS is due to release its full year results next week.