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BT Buys Indian Outsourcer

BT Group plc (NYSE: BT; London: BTA)'s new joint venture in India has made its first acquisition, picking up IP and outsourcing services provider i2i Enterprise Ltd. for an undisclosed sum. (See BT Buys I2I.)

BT inherited a relationship with i2i through its acquisition of Infonet in 2004. (See BT Goes Global – Again!) I2i distributes BT Infonet 's managed networking services, and according to Light Reading's Who Does What: Outsourcing to India report, also offers a full range of business process outsourcing (BPO) services.

The acquisition gives BT Telecom India an inroad into the country's outsourcing market, where it sees the opportunity to rake in revenues from outsourcing providers that need high-speed data connections to their customers around the world. (See BT Forms JV in India.) It will also be entering the BPO business itself through i2i's subsidiary i2iTelesource.

BT last month received approval of its application for national and international long-distance licenses, and plans to have corporate VPN services up and running by the end of the first quarter. (See BT Gets India OK.) BT says it's targeting revenues of $250 million from India by 2009.

The carrier also holds a 36 percent stake in software and services company Tech Mahindra Ltd. , its former joint venture with Mahindra & Mahindra. (See Tech Mahindra Soars on Debut.)

Companies like i2i are prime targets for acquisition or IPO as spending on IT and BPO services grows. According to Gartner Inc. , ICT (information and communications technology) spending in India is set to rise at a compound annual growth rate of 14.8 percent to surpass $36 billion by 2009.

With revenues at these companies climbing, acquirers are swooping in to get a piece of the action, and investor interest is pushing up the value of IPOs in the sector. (See Megasoft Buys VisualSoft.)

Firstsource Solutions Ltd. , formerly known as ICICI OneSource, opened its share offering last week at a price range of Rs54 to Rs64 per share, and saw it oversubscribed 50 times. The company is listing 69.3 million shares, a 16.65 percent stake, on India's National Stock Exchange and the Bombay Stock Exchange.

Firstsource offers BPO services to the telecom, finance, and healthcare sectors. It reported revenues of Rs5.49 billion ($124.5 million) and net profit of Rs623 million ($14.1 million) for the nine months ended December 30, 2006.

— Nicole Willing, Reporter, Light Reading

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