Soon after awarding a $900 million network expansion contract to Finland-based Nokia Siemens Networks (NSN) for eight of its telecom circles in the country, Bharti Airtel has awarded a Rs 80 billion contract to Swedish telecom equipment manufacturer Ericsson for network outsourcing, maintenance and management.
The contract is being talked about as the largest ever signed by Ericsson.Analysts believe it will put the company back on a smooth track after the rough patch it faced over price-related problems in Bharat Sanchar Nigam Limited’s now much-scaled-down 23.3 million GSM line contract.
The Bharti-Ericsson supply and services contract, spread over two years, involves Ericsson building the carrier’s GSM/EDGE network and providing capacity management. Ericsson will design, plan, deploy, optimise and manage not only Bharti Airtel’s GSM network across 15 telecom circles in India, but also its pan-Indian prepaid platform spread across 23 circles. Ericsson will also deliver countrywide integrated device management solutions, enabling the use of advanced data services by all mobile customers across the retail and enterprise segments.
Referring to the deal with Bharti, Mats Granryd, president, Ericsson India and Sri Lanka says: “The contract is an important part of realising Bharti’s vision of a converged network, and of expanding coverage in rural India to launch innovative voice and data services for the Indian consumer. We are honoured that Bharti Airtel has chosen to partner with us in this grand venture that underpins our strategy of providing communications for all through sustainable and innovative solutions.
For Bharti, this is its fourth contract with Ericsson since 1995. Ericsson currently manages around 70 per cent of Bharti’s GSM/EDGE network spread across 15 circles in India. Ericsson’s nationwide IN billing caters to Airtel customers across all the 23 circles of Bharti Airtel. “This is the biggest deal our company has got into. It is a clear testimony to the big growth that is taking place in the Indian market,” said Akhil Gupta, managing director, Bharti Enterprises and joint managing director, Bharti Airtel, at the time of signing the contract.
In August 2006, Bharti had signed a $1 billion deal with Ericsson for managing Bharti’s networks in rural India.The recent deal is thus the second billion-dollar network outsourcing contract in under a year.
With 40.74 million mobile users, and additions of close to 2 million subscribers a month, it is evident that Bharti is in expansion mode. At the time of announcing the company’s financial performance for the quarter ended June 30, 2007, which saw 53 per cent topline and a 100 per cent bottomline growth, Sunil Bharti Mittal, chairman and managing director, Bharti Airtel, stated: “Bharti Airtel has maintained the growth momentum and retained its market leadership in the wireless segment. We believe that the Indian telecom sector is entering the next phase of growth, and we will continue to expand our networks aggressively.
The deal with Ericsson is very much in line with the objectives of the company to offer cost-effective telecom products and services. For Bharti, outsourcing has been a strategic decision. Over the years, it has preferred to tie up with global vendors like NSN, Microsoft, IBM and Ericsson to leverage their expertise. “The tie-ups enable Bharti to focus on delivering a better customer experience,” explains Manoj Kohli, chief executive officer, Bharti Airtel.
Under the new agreement, Ericsson will set up a core that will be both 2G and 3G enabled. However, the radio part will be only 2G, which implies that Bharti will have to float another tender for radioenabled networks in order to start 3G services. Nevertheless, the current investment in network upgrade is expected to pave the way for a location-based services platform, as well as for an all-IP environment with a pan-Indian prepaid platform, which will allow Bharti to charge differentially for voice and data. The contract will especially help the company to reach the rural areas, thereby further consolidating its leadership position.
Meanwhile, the Bharti Group has also been consolidating its businesses. It acquired a 4.99 per cent direct holding in Bharti Airtel from Vodafone for around $1.4 billion. The transaction is part of an agreement with Vodafone, which, after acquiring controlling stake in Hutchison Essar, had agreed to transfer part of its stake in Bharti Airtel to a Bharti Group company. With this deal, the Bharti Group’s holding in Bharti Airtel has increased to over 50 per cent. SingTel controls over 31 per cent, Vodafone 5 per cent and Temasek 4.99 per cent. The rest is held by the public and other institutions. The Bharti Group had earlier sold 4.99 per cent indirect stake in Bharti Airtel to Singapore-based Temasek for about $2 billion.
In all, after a strong financial performance in the first quarter of 2007-08, July has proved to be a good month for the largest telecom operator in the country.
