Vodafone Hutchison Australia (VHA) has agreed to a four-year extension of a managed services deal with Nokia Networks, with the value of the new contract thought to be worth around $200 million.
The deal looks significant because more of the work will be handled from Nokia Networks 's facilities in India -- a development that has been made possible by advances in computerization and virtualization technologies, according to Ray Owen, Nokia's head of Australia and New Zealand, as cited in local press reports.
Numerous operators have now 'outsourced' the management and operation of their networks to multinational vendors, in particular Nokia and Ericsson AB (Nasdaq: ERIC), hoping to reduce costs and free up resources for customer-service activities.
Owen promised the new deal would lead to additional cost savings and improvements in network quality for VHA, which competes against Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) and SingTel Optus Pty. Ltd. in Australia's mobile market.
"Leveraging on our knowledge base and the expertise of our global delivery centers, we will continue to improve VHA's network quality and operational efficiency at reduced operational cost," he said in a statement.
Under the fresh arrangement, Nokia will provide operations and maintenance services for VHA's 2G, 3G and 4G networks from its facilities in India.
The deal includes the provision of a remote network management service from Nokia's Indian Global Delivery Center.
According to the Sydney Morning Herald newspaper, Owen has claimed that Nokia's Indian business is better placed than local teams to cope with major unexpected incidents, including natural disasters, because it has experience of looking after as many as half a billion customers in India.
The Sydney Morning Herald also said that market sources had indicated the contract was probably worth about $200 million.
VHA's decision to outsource so much of the responsibility for its networks to another jurisdiction could arouse concern given the network problems it experienced in 2011, when a series of outages prompted millions of customers to quit the operator's service.
Indeed, VHA appeared to hold Nokia (then Nokia Siemens Networks) at least partly responsible for the network problems, cancelling a payment of A$8 million to Nokia Siemens that year. In retaliation, Nokia subsequently took VHA to court over its refusal to pay up.
At the time of the outages, VHA and Nokia Siemens were collaborating under a managed services deal signed in April 2010, but their managed services relationship dates back as far as 2006.
Having served as many as 7.5 million subscribers in 2010, VHA had just 5.3 million on its books earlier this year and has struggled to overcome the reputational damage caused by the problems in 2011.
Even so, VHA claimed to have grown its customer base in the second half of 2014 and expects to make further progress this year, despite reporting an 8.8% drop in service revenues in 2014.
"The decline in customer revenue for 2014 reflects customer losses in 2013, but we're confident we've now reversed that and we expect to see customer numbers continue to grow in 2015," said James Marsh, VHA's chief financial officer, in a statement published last month.
— Iain Morris, , News Editor, Light Reading