India is the world’s second largest mobile market with nearly 450 million wireless users as of June 2009. Despite the global slowdown which has affected businesses and industries worldwide, India’s telecom industry has been adding more than 10 million mobile users each month.
As existing and new telecom operators expand to the smaller towns and villages to achieve the next level of growth, the telecom networks have to be upgraded in terms of size, quality and management. Also, companies like Reliance Communications (RCOM) and Tata Teleservices Limited (TTSL), which used to offer just CDMA-based services, are now offering or readying to offer GSM services using the dual technology clause in their licences. As a result, the demand for telecom equipment has increased manifold.
Along with this, the demand for network implementation and management services has also increased. A growing number of operators are outsourcing these activities to telecom equipment makers or, as Bharti Airtel calls them, “specialists”.
All this has translated into brisk business for telecom vendors. In the past one year, key vendors like Alcatel-Lucent, Ericsson, Motorola, Nokia Siemens Networks (NSN), Huawei and ZTE have seen a significant amount of business come their way. The following are some of the key recent contracts awarded by telecom operators in India…
Existing operators
Bharti Airtel
Known for using outsourcing as a strategy, Bharti Airtel has recently engaged Alcatel-Lucent, the world’s leading manufacturer of fixed line phone equipment, to expand and manage its fixed line and broadband business. The two companies have signed a five-year managed services partnership agreement which includes end-to-end activities like installation, service rollout, fault repair and service continuity as well as services such as high speed internet and video conferencing.
The $500 million deal will see the creation of a joint venture (JV) in which Alcatel-Lucent will hold 76 per cent equity and Bharti Airtel the remaining 24 per cent. The former will run the JV while Bharti Airtel will provide the bulk of the 4,000 staffers required. Subscriber information and their revenues will also be on Bharti Airtel’s books. However, the operator will not transfer any of its material assets to the JV.
“This JV will help us accelerate performance as we migrate to next generation networks (NGNs) for our broadband and telephone customers,” says Bharti Airtel’s chief executive officer and joint managing director, Manoj Kohli.
Early June, the company awarded a contract to Comviva Technologies Limited ?? a leading provider of integrated solutions for value-added services (VAS) to mobile operators in emerging markets ?? to manage its VAS portfolio. As part of the three-year managed services agreement, Comviva will handle over 2,000 of Airtel’s VAS nodes across India to meet specific service level agreements.
Meanwhile, with Bharti Airtel’s multibillion dollar network deals with Ericsson and NSN coming up for renewal in 2010, network expansion and management contracts worth over $2 billion will be up for the taking. Airtel has already invited bids from global equipment vendors including Chinese companies, for the contracts.
RCOM
The company has recently awarded a Rs 25 billion operations and maintenance contract to Alcatel-Lucent to help speed up the rollout of its telecom infrastructure. RCOM is planning to acquire around 8,000 base transceiver systems (BTSs) as well as GSM, CDMA and 3G equipment from the global major, which will be deployed across the country.
RCOM is also close to finalising a $1 billion contract with Chinese vendor Huawei Technologies for the rollout of 30 million new mobile connections.
Last year, RCOM and Alcatel-Lucent formed a JV for network management services, with RCOM holding 33 per cent stake and Alcatel-Lucent the remaining 67 per cent as well as operational control of the new entity. The idea behind the tie-up was to claim a slice of the $16 billion managed network services industry catering to CDMA and GSM telecom operators at the global level.
Recently, RCOM tied up with Krishak Bharati Cooperative Limited (Kribhco) under a rural marketing initiative. Kribhco will hold 60 per cent equity in the JV while the remaining stake will be held by the Reliance ADA Group. The JV will market telecom and non-telecom products and services across the country, covering 72 per cent of the population, through a di tribution network of over 25,000 cooperatives, 6,300 member cooperatives and 60 krishi seva kendras. The tie-up is intended to enhance rural teledensity.
Bharat Sanchar Nigam Limited
With controversy and contracts going hand in hand, it is not surprising that Bharat Sanchar Nigam Limited’s (BSNL) mega tender for 93 million 3G/GSM lines has run into trouble. Following the resolution of the security issues concerning the selection of Huawei, BSNL is now faced with NSN’s complaint that the state-owned operator has not been fair and transparent in awarding the contracts. NSN has approached the Central Vigilance Commission seeking a hearing on the matter.
BSNL is now waiting for the necessary regulatory approvals to officially sign the crucial contract comprising 74.94 million 2G and 18.06 million 3G lines, which will help the company increase its subscriber base. Though no final decision has yet been taken, it seems that the contract will be shared between three global equipment makers: Ericsson, Huawei and the Alcatel-ITI combine. While Ericsson will get the deal for the north and east zones, Huawei will get the south zone and Alcatel-ITI the west zone.
Meanwhile, Spanco, a telecom solutions and BPO player, has emerged as the lowest bidder for BSNL’s telecom infrastructure implementation and maintenance contract for the west zone. Spanco will get Rs 37.5 billion worth of projects under the Rs 75 billion contract, while the rest will go to the second and third lowest bidders. According to the deal, Spanco will set up and maintain towers, power plants, in-building solutions and electric cablings for BSNL for seven years.
In another deal, HCL Infosystems has clinched an order worth Rs 2.4 billion from BSNL to implement a system integration project comprising around 60,000 enterprise resource planning (ERP) licences. This will help BSNL improve information flow, cycle time, financial performance and information transparency.
TTSL
In December 2008, TTSL teamed up with NSN to roll out its pan-Indian GSM network. According to the contract, NSN will be the key vendor for TTSL, deploying and managing network operations over a period of five years. The contract has put NSN in charge of local supplies, project management, network planning and rollout and system integration activities.
TTSL recently tied up with Israeli wireless networking system supplier Ceragon Networks for the launch of GSM networks in seven circles. The new deal is part of a long-term supply agreement between the two companies, signed in mid-2008, under which Ceragon has already deployed high capacity backhaul equipment in three circles.
TTSL is also in a seven-year contract with Alcatel-Lucent to expand its CDMA/ GSM network in 22 circles. AlcatelLucent’s solution will help optimise TTSL’s capex and opex through a common set of tools to manage the compmay’s optical transmission network. It will also enable the operator to deliver data, voice, video and multimedia services with greater reliability and flexibility to match the customer requirements.
TTSL has now tied up with ECI Telecom, an Israel-based networking infrastructure solutions provider, in a deal worth about $70 million. Under the deal, ECI Telecom will deliver a fixed broadband access network supporting speeds of up to 18 Mbps.
Idea Cellular
Idea Cellular has awarded a five-year outsourcing contract to Firstsource Solutions, a business process outsourcing services provider. The contract, worth about Rs 1.45 billion, will see Firstsource providing customer interaction services including customer service, billing, new product information and plan details related interaction services to Idea in its Kerala and Tamil Nadu circles.
Idea has also entered into a 10-year agreement with IBM for outsourcing a part of its IT operations, in a deal worth somewhere between Rs 27 and Rs 36 billion. Under the contract, IBM will provide Idea with the requisite technology for billing and credit collection, and for managing frauds as well as customer relationships. IBM will also help in the integration of the operator’s business processes and its IT infrastructure to reduce Idea’s operational costs and technology risks.
MTNL
Mahanagar Telephone Nigam Limited (MTNL) has signed a multi-year deal with Alcatel-Lucent under which the latter will provide its end-to-end GSM/EDGE solution. The NGN solution will help MTNL simplify its mobile network, handle traffic growth and reduce operational costs.
Recently, BSNL also awarded a Rs 2.5 billion contract to Sterlite Technologies, which is backed by the Chinese vendor Huawei, to roll out a Gigabit capable passive optical network (GPON). GPON is an optical cable access technology used for high-capacity broadband services.
Aircel
Telcordia, a global communications software company, has been awarded a fiveyear, multi-million dollar contract by telecom operator Aircel. According to the contract, Telcordia will implement RealTime Charging, a flexible charging and policy control solution which will enable Aircel to quickly and easily launch new service offers for prepaid subscribers.
New players
Unitech Wireless
Unitech Wireless has signed an outsourcing contract with Wipro Technologies based on which Wipro will deploy a component-based service delivery platform, enabling the operator to provide a wide range of services like multi-channel access, real-time information delivery, multimedia content and value-added services.
Unitech Wireless, which has a panIndian licence, intends to start operations initially in five circles (Tamil Nadu, Karnataka, Andhra Pradesh, West Bengal and Kerala) for which it has received spectrum. To launch services before the end of the year, the operator has taken a number of initiatives. It has recently signed a $500 million contract with Ericsson under which the latter will supply network equipment and manage the rollout of services in the Bihar, Uttar Pradesh (East) and Uttar Pradesh (West) circles.
Unitech Wireless has also awarded contracts worth $200 million each to Huawei and Alcatel-Lucent to build, install and manage its GSM network over a five-year period. Huawei will deliver telecom equipment in the Kerala and Orissa circles, while Alcatel-Lucent will do so in Karnataka, Andhra Pradesh and Tamil Nadu.
Loop Telecom
Chinese vendor ZTE has bagged a contract from Mumbai-based Loop Telecom according to which the former will provide its V3 version end-to-end network equipment. Loop Telecom has the licence to operate in 21 circles and has received spectrum for 20 circles.
Sistema Shyam TeleServices Limited
Sistema Shyam TeleServices Limited (SSTL) has entered into a strategic agreement with Aegis BPO for outsourcing customer service operations of the former’s mobile service brand, MTS, in its eastern circles that include West Bengal, Bihar and Jharkhand. According to the terms of the contract, Aegis BPO will manage voice as well as back office processes for SSTL. SSTL currently offers services in Rajasthan, Tamil Nadu and Kerala, and has recently entered into the Kolkata circle.
Swan Telecom
Swan Telecom has signed a contract with Tech Mahindra and Ericsson, in a deal worth about $250 million. The deal, aimed at reducing operational costs and increasing Swan’s competitiveness, involves the operator retaining control of its computer hardware systems. Under the terms of the contract, while Ericsson will be responsible for the entire network, Tech Mahindra will be responsible for application development, maintenance and integration work.
Contracts in the pipeline
RCOM is planning to outsource the management of its broadband and fixed line services in a bid to cut costs. The contract, which could be worth more than $1 billion, is expected to be awarded in the next three to four months. RCOM’s JV with Alcatel-Lucent is likely to bid for the wireline outsourcing contract.
Ericsson is all set to win a multi-million dollar contract from Swan Telecom for rolling out its cellular network and providing managed services in some of the 14 circles for which Swan has the licence. Swan, which has UAE-based Etisalat as its strategic partner, may give the contract to at least two vendors in order to reduce risks and ensure faster implementation.
Videocon-promoted Datacom has selected Wipro, Tech Mahindra and IBM for awarding IT outsourcing contracts of about $150 million each. Datacom has licences to operate in all 22 telecom circles and will be launching operations soon.
