RCom in talks with Alcatel-Lucent for a $500 mn outsourcing deal

India’s second largest mobile operator, Reliance Communications is in advanced with Franco American Alcatel-Lucent for a $500 million outsourcing deal to manage its 70,000 – 80,000 kms of fibre optic cables across the country. Optic fibre cables carry voice and data and connect all mobile towers and landlines operated by the company.

Reliance Communications (RCOM) will also be the first Indian telcoms company to outsource the management of its optic fibre cable business. So far, Indian operators have only outsourced the management of their networks, IT systems, customer care and their value added services platforms

The outsourcing contract will not be given directly to Alcatel-Lucent, but it will be handled by the JV company that RCOM and the Franco American networks major had formed last year. RCOM holds a minority stake or 33% holding in this JV with Alcatel-Lucent holding the rest. Alcatel-Lucent runs this joint entity. Last year, RCOM had awarded a $500 outsourcing contract to this JV company to manage its GSM and CDMA mobile networks across the country. Top industry executives tracking this deal say that its size is set double to $1 billion as Reliance Communications is rapidly rolling out GSM networks across the country and also expanding its CDMA presence.

A top executive in Alcatel-Lucent confirmed that talks with RCOM for outsourcing the fibre optic networks were at advanced stages and added that the deal size could be similar to that of the recent outsourcing deal it had signed with Bharti Airtel.

In May 09, Alcatel-Lucent had bagged a $500 million five-year outsourcing contract from Bharti to manage the latter’s landline and broadband business. Here too, Alcatel-Lucent and Bharti had formed a JV with the Indian telco holding a 24% stake in the new entity. The bulk of the 4,000 staffers for the JV is form Bharti Airtel and the rest from Alcatel-Lucent.

The RCOM spokesperson refused to comment, but sources close to the Indian telco confirmed that talks were on and added that if the deal were to go through, it could be worth about Rs 500 crore per annum.

The primary reason behind RCOM and Bharti choosing to go with Alcatel-Lucent is that the French-American co is the global leader in optic fibre and the landline space. For instance, in about 50 countries globally, Alcatel-Lucent has been instrumental in transforming fixedline networks and making them Internet Protocol-based and also next generation network-enabled.

Indian telcos have made outsourcing a key plank of its business strategy – for instance, Bharti has has signed billion-dollar deals with network vendors such as Ericsson and Nokia Siemens to manage, build and operate its mobile network. It pioneered the network outsourcing model in 2004 by awarding IBM a 10-year, $750-million contract, whose scope is now worth $2.5 billion. Vodafone too has outsourced its IT systems to IBM.
Source: economictimes

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