Airtel's $500m outsourcing deal up for grabs

India's largest telco Bharti Airtel will outsource the management and maintenance of its 80,000 km-plus inter-city optic fibre cable network in a deal estimated at around $500 million over a five-year period, two executives familiar with the development said.

Bharti has sounded out several telecom equipment majors about the contract that will be issued soon, said an executive privy to the development. The deal is in line with the company's policy of outsourcing non-core activities to save costs and become a telecom marketing company.

Inter-city optic fibre cables, or transmission network in telecom industry parlance, carry voice (STD) and data (internet) traffic across the country. In revenue terms, Bharti is the largest carrier of voice and data traffic across the country and many of the smaller telcos use Airtel’s inter-city network for carrying their STD calls.

Bharti has made outsourcing the cornerstone of its business strategy, and has signed multibillion dollar contracts with network vendors such as Ericsson, Nokia and Siemens, which build, operate and manage its mobile network.

It pioneered the network outsourcing model in 2004 by awarding contracts to Ericsson and Siemens (which later merged with Nokia Networks) and this business model has now been replicated by over 100 operators globally. Bharti was also the first to outsource its IT requirements when it by awarded a 10-year $750-million contract to IBM, which is now worth $2.5 billion. Another billiondollar pact exists with six BPOs, which collectively handle Bharti’s customer services for a 10-year period.

The Alcatel-Lucent-Bharti JV is the front runner to manage and maintain the telco's inter-city networks, said another industry executive aware of the development. In April 2009, Bharti Airtel entered into a joint venture with Franco-American telecom gearmaker Alcatel-Lucent to manage its landline and broadband business.

Bharti is the minority partner in the 26:74 joint venture , and is paying the JV company about $500 million over a five-year period for managing its landline and broadband business in about 100 cities for the next five years.

When contacted, executives in Alcatel-Lucent declined to comment on the company's chances to bag yet another deal from Bharti. Confirming that Bharti was looking at outsourcing management and maintenance of its inter-city optic fibre cables, an executive from the company said: "The process is only at the initial stage and it may be a while before we award the contracts. As a company, we are always looking at ways to improve our offerings and being in greater efficiency. Outsourcing of transmission networks is part of this process."

But a Bharti spokesman declined to comment on what he termed as market speculation. "Bharti Airtel always evaluates opportunities to deliver better services to its customers in a more efficient way," he said.