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Reliance Suppliers Get Psyched

Thursday's announcement that Indian service provider Reliance Infocomm Ltd. is buying U.K.-based FLAG Telecom Group Ltd. (OTC: FLHLQ) has likely piqued interest among suppliers, especially those interested in Reliance's Ethernet plans (see Reliance FLAGs Up Expansion Plan).

Reliance is owned by one of the largest conglomerates in India, and the carrier has been planning a nationwide Ethernet network there for months (see Monster Metro Ethernet Project Unveiled). The $207 million acquisition of FLAG expands the picture internationally.

FLAG, which sells capacity to other carriers, has 180 telecom operator customers across Asia, Europe, the Middle East, and the U.S. It counts the top ten international carriers among its customers, while its 50,000-kilometer network connects with major Internet exchanges across the world.

It's a situation that could be good for Reliance vendors, such as Nortel Networks Corp. (NYSE/Toronto: NT), and would-be vendors, such as metro Ethernet startup Atrica Inc.

Nortel won a short-term supply deal for Passport switches and other equipment early in 2003 (see Nortel Closes Content Switch Deals and Nortel Supplies Reliance in India). Atrica is said to have made the carrier’s short list of candidates for its India rollout (see Atrica Closes in on Indian Deal).

Atrica has supposedly been shipping boxes to Reliance for testing for several months now (see Reliance FLAGs Up Expansion Plan). One source says Atrica’s latest round of funding was done specifically to service deployments in the Reliance network (see Atrica Raises More Cash).

New contract wins could be milestones for both established and startup players. What’s more, follow-on business from Reliance related to the expansion of metro Ethernet services to other regions through the FLAG acquisition could also be huge.

"The acquisition of FLAG means that Reliance has become a pan-Asian carrier," says Michael Howard, principal analyst with Infonetics Research Inc. "This has to be good for Atrica and other Ethernet suppliers, even it only boosts traffic inside India. That still means more capacity will be needed.”

Mathew Oommen, COO of Reliance Infocomm, isn't discouraging these musings. He says the current Ethernet network plans are based exclusively within India -- but that could change with the acquisition of FLAG.

“Telecom services are really boundary-less,” he says. “You can’t put a circle around India and say we are just providing service in India. Our goal is to become a global player, and we are taking small steps in reaching that goal.”

Oommen says the company has been seriously evaluating Ethernet switching gear from at least three vendors. He won't name them, but he acknowledges that startups are being considered. Reliance is testing the gear now and will begin field trials by the end of the month. The carrier hopes to be offering its metro Ethernet services commercially by the end of the first quarter of 2004.

Oommen says Reliance is looking for carrier-class Ethernet switches that can be deployed in multi-tenant dwellings and corporate buildings. The selected gear must provide the quality of service for integrated services, along with scaleable provisioning and management, he says.

He also says the contract will likely not go to a single vendor, because of the size and scale of the project. “I agree that the FLAG acquisition could mean a bigger opportunity for our equipment suppliers,” says Oommen. “But it is premature to really say.”

— Marguerite Reardon, Senior Editor, Light Reading

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