Bharti, Alcatel set up network management JV

Alcatel-Lucent will hold 74 per cent and Bharti the rest.

Bharti Airtel and Alcatel-Lucent, one of the world’s largest manufacturers of fixed-line phone equipment, announced a joint venture to manage the Indian telecom major’s fixed-line and broadband internet businesses.

Alcatel-Lucent will hold 74 per cent in the venture and Bharti Airtel the remaining equity.

Bharti has also signed a five-year $500 million (about Rs 2,500 crore) managed services deal with the new company for five years.

Apart from managing the broadband and fixed-line network, the joint venture will also install the services in consumer premises and upgrade the network. The joint venture will also offer services such as high-speed internet and video conferencing.

Alcatel Lucent will run the joint venture. The bulk of the 4,000 staffers for the joint venture will come from Bharti Airtel and the rest from Alcatel-Lucent. The joint venture will not, however, entail an asset transfer from Bharti and the subscribers and their revenues will be on Bharti Airtel’s books.

This is the second India deal for Alcatel. Last year, it signed a 70:30 joint venture with Reliance Communications for managed services for CDMA and GSM networks, also a five-year $500 million and for five years.

This is the first joint venture that Bharti has signed for managed services. The telecom company has signed several other multi-million dollar outsourcing contracts with Nokia Siemens, Ericsson and IBM. Explaining the reason for the change Manoj Kohli CEO and joint managing director of Bharti Airtel, said: “Unlike in wireless where you have to just put in a passive network and subscribers can roll in, the broadband business is very different. You have to go to consumer homes, install the equipment, explain how it works and that requires a lot more engagement. We thought for such a business a joint venture would be a more effective structure.”

Kohli added that the deal would help Bharti Airtel save costs but he did not quantify the savings. Bharti has only three million broadband customers and fixed-line customers in 95 cities across India and finds the need to scale up the numbers, if the government's target of 20 million broadband subscribers is to be met by 2010 (India has 6.2 million subscribers).