RCom awards $1-billion contract to Alcatel-Lucent

Written by fe Bureau | Mumbai | Updated: Jan 17 2013, 08:34am hrs
Billionaire Anil Ambani-controlled Reliance Communications (RCom) is awarding a $1-billion contract to France-based telecom equipment maker Alcatel-Lucent to manage the companys end-to-end services in east and south India.

This move will help Indias third-largest phone carrier by subscribers RCom to reduce its investment risk and facilitate moving 4,000 employees, or 15% of the companys workforce, to Alcatel over the next 90 days.

Under the contract, RCom will outsource network management for both its wireless and fixed-line operations to Alcatel-Lucent. Alcatel will be responsible for network performance and service quality by setting up next-generation separating support system.

Both the companies have had a history of partnerships. In 2008, they formed a JV to offer managed-network services to domestic and international telecom operators. This JV is expected to end in June.

This (contract) will enable RCom to take the lead in offering next-generation telecom solutions that will meet and exceed the expectations of our customers and help them transit from voice-led usage to a seamless data experience across multiple devices and platforms, Gurdeep Singh chief executive officer, wireless business, RCom, told reporters on Wednesday.

RCom, which has over 150 million customers, is saddled with a debt of about R35,000 crore, accounting for 10% of the cumulative debt of the telecom sector.

Being the most leveraged company in the Indian telecom sector, RCom has been trying to reduce its debt load. In September, it tried to reassure investors and said the company will look at selling some stake in its telecom tower business next year to pare some of the mounting debt.

On the other hand, Alcatel-Lucent has been making losses as global telecom operators spend lower on network gear, and as it faces competition from low-cost Chinese rivals.

By outsourcing network management, RCom will be able to focus on marketing. Due to economies of scale, Alcatel will be able to manage network services with less money, and in a more competent manner. So, for similar level of services, RCom will have to pay lesser, says an analyst with a domestic brokerage, who does not want to be named.

RCom chief executive officer (global and enterprise business) Punit Garg said that this is the first time that national long-distance network and access network is being outsourced. The company is also expected to make further announcements regarding network management in north and west India.

RCom share fell 5.8% to close at R80.95 on the BSE on Wednesday. The stock has lost over 8% of its value in the past one year.