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Key contracts: Operator-vendor partnerships on the rise

March 30, 2012
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In the wake of the 2G controversy and the resultant uncertainty, the country’s telecom sector remained subdued over the past year. Only a handful of managed services contracts and equipment deals were finalised in 2011. Most operators, not surprisingly, were hesitant to enter into any major partnerships.

However, 2012 seems to have started on a better note. Just two months into the year and operators have already entered into partnerships with leading equipment vendors. These agreements are of a diverse nature and include managed services deals, equipment procurement contracts as well as pacts for network rollout and network management for long term evolution time-division duplex (LTE-TDD) technology.

According to analysts, with the Supreme Court cancelling the 122 contentious licences awarded in 2008, the industry is now headed towards stability. With the revised National Telecom Policy expected to be announced in April 2012, the sector expects greater clarity on the policy and regulatory fronts going forward.

Further, with broadband wireless access (BWA) services due to be launched later this year, the telecom space is likely to witness several LTE-TDD rollout and management contracts in the coming months.

tele.net takes stock of the key deals signed during the last six months...

Bharat Sanchar Nigam Limited

After several delays, Bharat Sanchar Nigam Limited (BSNL) finally completed the process of selecting vendors for the procurement of GSM lines in February 2012. In July 2011, BSNL had floated a tender for planning, financing, engineering, supply, installation, testing, commissioning and annual maintenance of 14.37 million lines on its GSM/UMTS/LTE-based cellular mobile network (under Phase VII expansion) in the country’s north, east and south zones. However, following concerns over the procurement procedures, the tender had to be suspended twice. Bids for the tender were finally invited in December 2011. The contract aimed at boosting the operator’s network capacity and its estimated value was between $710 million and $1.2 billion.

Leading telecom equipment manufacturers including Alcatel-Lucent, Ericsson India, Nokia Siemens Networks (NSN), Huawei Technologies and ZTE had submitted their bids. However, ZTE and Huawei emerged as the lowest bidders. Of the three zones for which the contracts are awarded, ZTE is set to supply equipment to two zones and Huawei to one. BSNL had also invited bids for the procurement of intelligent network equipment from vendors. Alcatel-Lucent emerged as the lowest bidder in this category, followed by ZTE.

Bharti Airtel

Recently, Bharti Airtel selected NSN to build and operate its LTE-TDD network in Maharashtra. As per the agreement, NSN will roll out the LTE-TDD network for Airtel, and supply end-user data devices that can provide data speeds of up to 100 Mbps. Further, NSN will provide its LTE-TDD 6 pipes radio solution and use its global network solutions centre, located at Noida, to remotely deliver services for efficient network performance. While this is the first ever BWA deal that has been announced formally by Bharti Airtel, the operator has reportedly already awarded a 4G contract to ZTE in the Kolkata circle. Under the contract, Airtel will source its LTE-TDD equipment from ZTE during the first phase of deployment.

Meanwhile, Bharti Airtel has also renewed its managed services contract with NSN in eight of its circles, namely Bihar and Jharkhand, Kolkata, Gujarat, Maharashtra and Goa, Madhya Pradesh and Chhattisgarh, Mumbai, Orissa and West Bengal. As per the agreement, NSN will continue managing the operator’s 2G and 3G networks in these circles for the next five years. The contract value is estimated at $300 million.

This development follows the operator’s renewal of its managed services contract with Ericsson India towards end-2011. Under the five-year contract, Ericsson India is to manage and maintain Bharti Airtel’s mobile networks in 15 circles.

Idea Cellular

Idea Cellular has recently extended its managed services agreement with Ericsson India from one circle to five circles, namely Mumbai, Jammu and Kashmir, Himachal Pradesh, the Northeast and Assam. Under the three-year agreement, Ericsson India will be responsible for managing Idea’s network and field operations, maintenance activities for its 2G and 3G sites, network design and planning, and improving network performance for the operator’s infrastructure.

Ericsson’s global service centre in the country will play a key role in managing Idea’s network. As part of the agreement, about 70 Idea employees will join Ericsson India.

Augere

In October 2011, Augere selected Ericsson India to manage its LTE network in the country. The company has planned an investment of $50 million-$60 million for its BWA rollout in the country. The deal has provided Augere with an end-to-end LTE-TDD solution as well as managed services in 14 cities in the Madhya Pradesh circle, where it won the BWA licence in 2010.

Other deals

Vodafone India signed an agreement with Sistema Shyam TeleServices Limited (SSTL) to sell its modems under the NetCruise brand, which run on SSTL’s network. As per the agreement, the operators will share the revenue from this service. While the modem users would be considered SSTL subscribers, they would be billed by Vodafone India.

In December 2011, Tata Teleservices Limited signed a 10-year agreement with Kavveri Telecom Infrastructure, a subsidiary of Kavveri Telecom, to use in-building wireless solutions for improving the its network coverage. During the same month, Tulip Telecom secured four large network and data centre orders with a collective value of about Rs 2 billion. These included a three-year order worth Rs 488.8 million from the Rajasthan government, as part of the central government-funded Rajasthan State Crime and Criminal Tracking Network and Systems project; a five-year project worth Rs 247.8 million in Bihar under the Restructured Accelerated Power Development Reforms Programme; a Rs 500 million connectivity order from Sahara’s Parabanking division; and another five-year data centre order worth Rs 750 million for the new Bengaluru-based facility of a large global telecom major.

Partnerships in the pipeline

Reliance Communications (RCOM) is in talks with vendors regarding a $3 billion network management contract. The operator has approached Ericsson India, Alcatel-Lucent, ZTE and Huawei to manage its mobile phone networks and is likely to finalise the deal by mid-April 2012. The proposed deal for network management would bring about a 20 per cent reduction in RCOM’s operational costs as a large number of the operator’s employees would be moved to the vendor that wins the contract. At present, RCOM’s networks are managed by Alcatel-Lucent. However, the operator may consider exiting the venture if Alcatel-Lucent does not win the new contract.

Aircel is also close to renewing its $100 million outsourcing deal with NSN to manage its mobile networks. NSN is already managing and maintaining Aircel’s networks in seven circles – Delhi, Mumbai, Kolkata, Punjab, Haryana, West Bengal and Rajasthan, and the operator’s 3G networks in three of these service areas. The deal, when finalised, would be NSN’s second outsourcing deal in 2012, after its recent $300 million agreement with Bharti Airtel.

Meanwhile, Samsung Electronics is also planning a foray into the 4G equipment market, which is largely dominated by Ericsson, Huawei and NSN. Samsung is reportedly in talks with one of the leading service providers in the country to sign an LTE TDD contract and expects to conclude the negotiations with the operator in the first half of 2012.

In a move to improve its financial health, BSNL has also decided to follow the outsourcing model adopted by private sector operators. The public sector undertaking is now looking at outsourcing the operations and maintenance of its telecom towers and is likely to take concrete steps in this regard by end-March 2012. Currently, the expenditure on the maintenance of the towers accounts for almost 30 per cent of BSNL’s total spending. Private operators like Bharti Airtel and Vodafone India have outsourced almost all their non-core activities, including network and IT management, to companies such as NSN, Ericsson, Alcatel-Lucent, IBM and Wipro in order to keep operational costs as low as possible.

Going forward

Following the Supreme Court verdict, a majority of the players whose licences have been revoked will either cancel or defer their expansion plans. However, other incumbent players would be looking at making good their investment in the 3G and BWA licences. They are likely to go ahead with their network expansion and upgradation plans. In particular, the BWA space will witness network rollouts this year, as the plan is to offer broadband services by the end of 2012. Going forward, it would be interesting to see how the year unfolds for operator-vendor partnerships.

 
 
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