AlcaLu, Bharti Form Joint Venture
The new legal entity will be operated by AlcaLu, which will hold a 74 percent stake, with Bharti Airtel owning the remaining 26 percent. An AlcaLu spokesman confirmed to Light Reading that the business AlcaLu will generate from the new venture will be worth $500 million over a five-year period.
The new venture will be responsible for the design, planning, deployment, optimization, and management of Bharti Airtel’s fixed line network, which is being migrated toward an IP-based infrastructure.
AlcaLu's role will include the management of equipment from other vendors, such as UTStarcom Inc. (Nasdaq: UTSI), which provides equipment for Bharti's emerging IPTV business. (See Bharti Profits From Mobile Boom.)
AlcaLu would not comment on whose equipment it would be managing or how, beyond saying that the company has considerable experience managing multi-vendor networks.
The joint venture will be staffed by employees from Bharti, who will provide knowledge of the existing network and the local market, and AlcaLu, plus some new hires.
Bharti Telemedia, the Airtel division responsible for its fixed-line network, offers DSL-based broadband services in 95 cities, has nearly 1.1 million broadband subscribers, and is activating more than 100,000 new broadband connections each month. At the end of March, India had 6.22 million broadband subscribers.
Speaking yesterday as the company's results were announced, Airtel's CEO Manoj Kohli explained that the company's fixed-line strategy is to concentrate on upgrading services in the 95 cities in which it operates, and that it doesn't have plans to expand its coverage beyond them. This focused approach is helping Telemedia increase its subscriber base -- it currently has 2.7 million customers, about 19 percent more than a year ago -- and generate monthly ARPU (average revenue per user) of 1,071 Rupees ($21.44).
Bharti is hoping the new relationship will help it cut operating costs and speed up its ability to offer more advanced multimedia services for its retail and business customers.
This is the fourth managed network services deal AlcaLu has signed with a fixed-line carrier during the past 18 months, suggesting growing support for the outsourcing model that has gained favor primarily amongst mobile operators.
The three other agreements are with Brazil Telecom, BT Global Services , and Telecom New Zealand Ltd. (NYSE: NZT; New Zealand: TEL). AlcaLu also has arrangements with mobile operators, including Reliance Communications Ltd. in India, with which the vendor has also formed a joint venture. (See BT Outsources Ops to AlcaLu, Kiwis Pick AlcaLu, and AlcaLu, Reliance Form Joint Venture.)
In total, around 180 million fixed and mobile subscribers are connected to networks managed by AlcaLu, although Bharti Airtel's mobile networks are managed by Ericsson AB (Nasdaq: ERIC) and Nokia Networks .
— Catherine Haslam, Asia Editor, Light Reading