AlcaLu in Line to Win Reliance Deal

Alcatel-Lucent Managed Services, the joint venture between Alcatel-Lucent (NYSE: ALU) and Indian carrier Reliance Communications Ltd. , is the frontrunner to win a lucrative outsourcing deal to run all the telco's fixed and broadband operations, a Reliance spokesman tells Light Reading Asia.

The spokesman confirms that India's fourth largest fixed operator is looking at outsourcing the management of its fixed and broadband operations, with a deal set to be formalized in about four to six weeks. Initial indications from the carrier suggest the deal will be worth more than $250 million over five years.

The joint venture, in which Reliance has a 33 percent share, already manages the Indian operator's wireless networks following the award of a contract now valued at $750 million over five years (up from the original valuation of $500 million). (See AlcaLu, Reliance Form Joint Venture.)

In its first year operating Reliance's wireless networks, the joint venture claims to have achieved operational cost savings of between 20 percent and 25 percent. (See AlcaLu, Reliance Laud JV.)

Reliance will be looking for similar cost savings from its fixed and broadband network operations, as well as providing Reliance with a stable level of operating expenses and helping it to keep a lean organization. The spokesman says it's talking to various vendors that have the global leadership and capability to run the telco's networks, but that the AlcaLu/Reliance joint venture is the front runner.

The contract to manage the fixed and broadband networks, which serve far fewer customers than the wireless networks, is expected to be worth less than the wireless deal.

The Reliance spokesman confirms that the total value of all its outsourcing contracts for wireless, fixed, and broadband will be well over $1 billion over five years: That values the prospective fixed network deal at more than $50 million per year, though the value could be as high as $100 million per year to the winning bidder.

Reliance has more than 175,000 kilometers of optical fiber that is part of a converged wireless and wireline pan-Indian network covering 20,000 towns and 500,000 villages. The close integration of its fixed and wireless transport networks is another reason for Alcatel-Lucent Managed Services being the obvious choice.

With more than 1.12 million fixed-line customers at the end of May, Reliance Communications has less than half the number of fixed services as rival Bharti Airtel Ltd. (Mumbai: BHARTIARTL) (more than 2.7 million), but both carriers are building out new broadband capabilities. (See Bharti Airtel Speeds Up DSL, Indian Carriers Commit to GPON, and Bharti Profits From Mobile Boom.)

Reliance does not publish its broadband subscriber figures but is upbeat on the growth of broadband in India in general. It predicts that total revenues from India's Enterprise broadband segment alone will more than double from $5.5 billion in 2008 to $13 billion in 2012.

The number of broadband connections in India is growing steadily at around 130,000 a month, and now stands at 6.4 million, according to figures from the Telecom Regulatory Authority of India (TRAI) .

Alcatel-Lucent has already bagged a fixed network managed services deal in India, winning a contract from Bharti Airtel to manage all of its fixed operations, a deal estimated to be worth $500 million over the five-year term. (See AlcaLu, Bharti Form Joint Venture.)

— Catherine Haslam, Asia Editor, Light Reading

flam 12/5/2012 | 4:01:33 PM
re: AlcaLu in Line to Win Reliance Deal

Looks like the two bricks did learn how to float.


rahat.hussain 12/5/2012 | 4:01:31 PM
re: AlcaLu in Line to Win Reliance Deal

does anyone find it ironic that an indian company will outsource services to a euro-american conglomerate? and cut opex by 20+%?

odo < -- who has seen outsourcing go in many different directions

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