RCom deal: Alcatel, Ericsson front runners

Global telecom companies Alcatel-Lucent SA and Ericsson have emerged as front runners for Reliance Communications Ltd (RCom)'s Rs 8,000-crore long-term outsourcing contract.

The deal, to be awarded to a single operator, was expected to be finalised early next month and the talks were in the final stages, said people aware of the development.

Other leading international telecom equipment makers, including Nokia Siemens Network, Huawei Technology Co Ltd and ZTe Corp, had also bid for one of the largest managed services contract in the past few years.

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As part of its offer, the new contract would cover the entire range of RCom's telecom services - wireless, wire-line, and utilities - on an end-to-end basis across the country.

This is different from managed service contracts deals signed by other telecom companies, where the deals would be restricted only to the company's wireless operations.

The deal would entail outsourcing end-to-end management services, including operational planning of the network (which most companies keep to themselves), management and maintenance of GSM, CDMA and wireline networks, fibre, utilities, internet protocol and field assurance (quality control).

Only information technology (IT) services and customer services will be kept out of the contract. Decisions on new roll-outs will remain in-house.

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Those in the know say the deal could entail the transfer of a substantial part of the 15,000 employees of RCom to the vendor that wins the contract. Discussions are said to be on to fix the number.

An RCom spokesperson, when contacted on the issue, said: "The constant criterion for Reliance Communications in its choice of vendors and business partners is to further improve the productivity and efficiency of its network, as well as the user experience for its customers."

The integrated outsourcing contract will help RCom, which has debts to the tune of Rs 36,000 crore (Rs 360 billion), reduce its cost by 15-20 per cent, say experts. Discussions are on with the shortlisted vendors to provide site-wise (tower-wise) network performance rather than the current overall network performance parameters. That should improve quality standards.

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The managed services model was pioneered in India by Bharti Airtel Ltd, which has signed long-term contracts with Ericsson, Nokia Siemens Network and Huawei for 2G and 3G services. Bharti also has an outsourcing deal with International Business Machines Corp for comprehensive IT solutions for a few years.

Vodafone India has two vendors, Ericsson and Nokia Siemens Networks, with which it has long-term managed service contracts.

Currently, RCom has a 50:50 joint venture (JV) with Alcatel-Lucent, which was announced in 2008 for managed services.

However, the domain for which the two vendors have been shortlisted would be much larger than the Alcatel-Lucent JV. RCom will pull out of the JV if its Alcatel-Lucent is not selected for the new deal. RCom has decided not to go for a JV model with the selected outsourcing partner.