Bharti signs fresh outsouring pact with IBM for five years

Sources say IBM will get $500 mn over next 5 yrs in a agreement that extends ongoing arrangement between the two companies

Bharti AIrtel, the country's largest cellular operator by subscriber base, said on Wednesday that it has signed a new agreement with IBM to manage the operator's infrastructure and application services in India over the next five years.

While both the companies did not divulge the deal value, sources have said that IBM will get about $500 million over the next five years. The agreement is an extension of an ongoing arrangement between the two companies.

Bharti Airtel had in 2004 signed an agreement with IBM to manage the operator's infrastructure, customer care and application services for the next 10 years. Though a total outsourcing contract, it was also based on revenue sharing. The deal size was $750 million and it kept going up, as Bharti-Airtel's customers grew. In 2004, when the first contract between IBM and Airtel was signed, Airtel had four million subscribers, and now, Airtel has more than 200 million users. For IBM, it was a showcase deal.

"As part of the new vision, Airtel is also building in-house capabilities and a strong partner eco-system, and has selected IBM to manage the IT infrastructure and applications for its operations in India," the companies said in a joint statement on Wednesday.

According to sources, Bharti AIrtel has restructured the outsourcing deal, and decided to get more partners to manage services and infrastructure that can be outsourced. According to sources, Tech Mahindra, TCS, Wipro are the other IT companies would are likely to get sizeable pie of the business. The deals with each of the new partners are expected to be signed over the next three months.

"The new model offers Airtel greater flexibility to scale services and adapt in real-time to changing market dynamics and offer a differentiated customer experience leveraging IBM's industry solutions and global experience," according to the joint statement.

The IBM-Airtel deal in 2004 was the first outsourcing deal in Indian telecom Industry. Following that, IBM signed a contract with Idea Cellular worth $800-900 million, which comes up for renewal in 2019-20, and with Vodafone, which is worth $1 billion.