Monday, August 31, 2009

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TechM, Wipro, IBM vie for $400-m Loop Tele deal

LOOP Telecom, where the Essar Group has a stake, has shortlisted Tech Mahindra, Wipro and IBM for an IT outsourcing contract worth around $400 million. The contract is believed to be spread across a period of 10 years and will not include Loop Mobile’s operations, said two industry officials familiar with the deal. Loop Mobile provides cellular services in Mumbai, while operations in the rest of the country is under Loop Telecom.

The outsourcing contract is for the telco’s system integration and maintenance of IT systems across 22 cellular circles. This deal does not include BPO services since most of the back-end operations are done by Essar Group’s Aegis BPO. Loop Telecom has recently launched its services, selectively in Tamil Nadu, Orissa, Kerala and Karnataka.

A Wipro spokesperson said the company was in talks with a few telcos and would not comment on specific engagements, while Tech Mahindra and IBM declined comment on the deal.

A Loop Telecom spokesperson said, “We are constantly exploring ways to enhance our business model, launch plans and operational decisions and regularly engage in dialogue with vendors to help us build a compelling proposition. Nothing has been finalised in terms of partners or the contract amount. An announcement on our IT contract will be made as and when it gets firmed up.”

Loop Telecom is believed to be exploring an operating expenditure (opex) model, under which the shortlisted players can take Loop Telecom’s IT assets on its books. “They could either rent or lease the assets back to the client,” said a person familiar with the deal. This model of outsourcing is considered more cost-effective for companies. The telecom company has already outsourced its network infrastructure to China’s ZTE and Huawei Technologies.

Loop Mobile, earlier known as BPL Mobile, has a subscriber base of 2.4 million in the Mumbai circle, for which it already has an in-house team of IT professionals.

“The request for proposal (RFP) did not mention providing IT services to Loop Mobile, but to other 22 circles. While the company has had a soft launch in four circles, it will scale it up after finalising on the IT vendor,” said
another official familiar with the contract.

The domestic market has been the focus of many IT service providers after a decline in exports from the US and Europe, apart from a host of new companies launching mobile services in India. These new entrants have kept the order book running for IT companies. Earlier, Wipro had bagged a full IT outsourcing project from Unitech Wireless worth approximately Rs 2,500 crore over a nine-year period.


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