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Friday, April 23, 2010

Infy, Wipro, TCS, IBM in race to manage Bharti-Zain's IT network Friday, April 23, 2010

Bharti Airtel has invited bids to outsource operations worth over a billion dollars for African assets it recently acquired from Kuwait’s Zain Telecom, suggesting it is looking for better deals than those being offered by its existing partners.

India’s largest mobile phone company has invited bids for IT-related services as well as the management and maintenance of mobile and landline networks in 15 nations as it looks to replicate the success of its low-cost model of operations in Africa.

“The three big Indian IT firms (TCS, Infosys and Wipro) along with IBM are in the race as Bharti Airtel is looking for the best deal,” an executive with direct knowledge of the deal said. Another industry executive said that Bharti may be looking to diversify its partner base as “it would not want to risk putting all its eggs in a single basket.”

Since 2004, IBM has been handling Bharti IT requirements in a first-of-its-kind deal globally.

This executive added that Ericsson and Nokia Siemens, which maintain and manage Bharti Airtel’s networks in India through multi-billion-dollar contracts, are not guaranteed similar deals with Zain.

“Nokia Siemens and Ericsson will have to compete with China’s ZTE and Huawei and bids have already been called for,” this person said. While Bharti has maintained it will take its partners along when it goes overseas, it has also been open to engaging with new vendors who offer a better deal. For instance, Bharti awarded the contract to build, manage and maintain its networks in Sri Lanka to China’s Huawei.

Franco-American telecom gearmaker Alcatel-Lucent may also be a potential bidder for the African deal; it bagged a $500-million contract from Bharti last year to manage its fixedline networks in India.

Outsourcing all key operational functions , a concept pioneered by Bharti Airtel, is the key to its low-cost-high-usage business model that has enabled the telco to build a base of over 125 million customers in India and emerge as the country’s largest operator by both customers and revenues. Replicating this outsourced model of operations in Africa will be the key to returning Zain to profitability.

Bharti Airtel’s 10-year deal with IBM was originally estimated to be worth $750 million but it has already crossed $3 billion, an industry executive with knowledge of the contract said. Bharti had also outsourced the IT needs for its Sri Lankan operations to the US-headquartered company. Riding on the success of its deal with Bharti, IBM signed similar outsourcing agreements with Vodafone and Idea Cellular worth $1.2 billion and $900 million, respectively, in 2008. Last year, IBM signed a similar deal with Malaysia’s Maxis to manage its IT operations.

Indian IT firms have also had a fair share of success and have walked away with a string of recent telecom outsourcing deals. Etisalat DB recently awarded a contract worth $400 million to Tech Mahindra, while Unitech Wireless, in which Norway’s Telenor holds a controlling stake, has outsourced its IT infrastructure management to Wipro in deal worth about $500 million.

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