RCom, Alcatel-Lucent close to Rs 3,000-crore outsourcing deal

In what could be one of the largest outsourcing deals in the Indian telecom space, Reliance Communications (RCom) is close to awarding a $500-600 million (Rs 2,500-3,000 crore) operations and maintenance contract to Foprench telecom infrastructure provider Alactel-Lucent.

The companies are in the final stages of negotiations to outsource operations and maintenance of RCom’s GSM and optical fibre cable services. The deal is expected to be signed in a couple of weeks, sources familiar with the developments said.

The contract would be either executed independently by Alcatel-Lucent or by the joint venture between Alcatel-Lucent and RCom formed in May 2008 for managed network services that would take on outsourcing contracts from global telecom operators.

On the GSM front, RCom will initially outsource the operations of five circles — Himachal Pradesh, Haryana, Punjab, Jammu & Kashmir and Chhattisgarh — to Alcatel-Lucent. Once this is complete, the Anil Ambani group company will outsource the remaining GSM operations in phases.

RCom has been rolling out GSM services after it received spectrum — the radio frequencies that enable mobile communications — for 14 circles early last year (the company already has GSM services in other circles) and is expected to complete the process in this quarter.

The outsourcing deal also includes managing and strengthening RCom’s 175,000 km global optical fibre cable (OFC) systems. The OFC system, of which 80,000 km is in India, is also used to carry international telecom data.

RCom has over 6,000 engineers, and according to sources, they are likely to be moved to Alcatel-Lucent payrolls. However, this could not be independently confirmed.

Asked about the deal Alcatel-Lucent President (India) Vivek Mohan declined to comment. An RCom spokesperson did not confirm or deny the move, but said the company continuously evaluated initiatives to improve competitiveness, enhance network quality and reduce operational expenditure “to redefine the benchmarks of superior customer experience and enhance value for its two million shareholders”.

Several other Indian telecom majors have signed deals to outsource operations and management to focus on customers and revenues. Bharti, India's largest mobile service provider, has two deals for various operations, one with Alcatel-Lucent signed in May and a $750 million deal with IBM signed in 2004. In 2007, IBM signed a five year deal with Vodafone-Essar to handle information technology-related work and a 10-year contract with Idea Cellular for $600-$800 million (Rs 2,700- Rs 3,600 crore).