Global Economics

Bharti Forms India Telecom Alliance with Alcatel-Lucent


Bharti, India's biggest telecom, is teaming up with gearmaker Alcatel-Lucent to expand its focus to marketing and sales

Bharti Airtel has entered into a joint venture with Franco-American telecom gear maker Alcatel-Lucent to manage its landline and broadband business, expanding its tested strategy of outsourcing technology functions to focus more on marketing and sales.

Bharti, India's largest telecom company, will be the minority partner in the 26:74 joint venture, and will invest Rs 2,500 crore into the new entity over five years.

"In about 40 countries, Alcatel-Lucent has carried out the transformation of fixed line networks to make them Internet Protocol-based and also next generation network-enabled. This is the type of support we want, and we chose Alcatel-Lucent," said Bharti Airtel CEO Manoj Kohli.

Bharti has made outsourcing a key plank of its business strategy, and has signed billion-dollar deals with network vendors such as Ericsson, Nokia and Siemens, which manage, build and operate its mobile network. It pioneered the network outsourcing model in 2004 by awarding IBM a

10-year, $750-million contract, whose scope is now worth $2.5 billion.

Another billion-dollar pact exists with six BPOs, which collectively handle Bharti's customer services for a 10-year period. However, this is the first time that the company is forming a JV to handle a core business instead of outsourcing it to a third party.

Mr Kohli said this was because of the complicated nature of the fixed line and broadband business compared with mobile telephony. "For instance, the average time our call centre executive spends with a broadband customer is about 8 minutes. Therefore, by forming the JV, we can be part of this process of engaging the customer," he told ET.

However, according to some industry analysts, a possible reason for Bharti to take the JV route may be because Alcatel-Lucent has an existing contract with Reliance Communications to manage its network based on the CDMA technology.

Mr Kohli said Bharti will not transfer any of its material assets to the JV, which will have 4,000 employees, some of whom will be transferred from Bharti Airtel. He declined to specify how many executives from Bharti will be shifted, but an executive familiar with the situation said a significant majority of its employees would be from Bharti Airtel.

Bharti Airtel has a 24% market share of the Indian mobile market, with nearly 94 million cellphone customers and over 2.7 million landline subscribers over 95 cities. Its landline business, which combines fixed-line telephony, Internet and IPTV services, is one of the most profitable segments, with fiscal fourth-quarter and annual profit margins of 42.1% and 42.4%. It accounts for about 9% of Bharti's total earnings and the average revenue per user here is Rs 1,071 per month, which is three times higher than that for its mobile users.


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus