Alca-Lu frontrunner for Bharti €715m outsource tender

Alcatel-Lucent is the likely frontrunner for Bharti Airtel’s latest fibre cable network outsourcing contract, analysts have told
Bharti Airtel chief executive Manoj Kohli has said the company plans to outsource the management of over 12,000 kilometres of its inter-city optical fiber network.
While company executives have refused to comment on the deal, two industry sources tracking India’s largest wireless business estimated the contract at more than $1 billion (€715.8 million) over five years.
Kohli told The Economic Times Bharti would form a joint venture and have a stake in the company to which the contract was awarded. Bharti already has a 26:74 joint venture with Alcatel-Lucent.
It entered into the partnership in April last year, to let Alcatel-Lucent manage its landline and broadband business in 100 cities. The five-year contract involves Bharti paying the joint venture $500 million.
Alcatel-Lucent “is the likely front-runner to win the contract,” India Infoline analyst G.V. Giri said, pointing to its expertise in the landline as well as wireless space and existing deal with Bharti. Executives from Alcatel-Lucent hadn’t responded to emails on the issue when the story was filed.

But if for some reason Alcatel-Lucent loses out, Bharti is likely to go with a blue-chip multinational, given its past choices for outsourcing contracts in India, Giri said. Nokia Siemens and Ericsson are also possible candidates, and both have existing contracts to manage Bharti networks.
In the last three years, Indian telcos have increasingly turned to outside vendors to manage their networks as they attempt to manage the steep increase in subscriber levels in a highly competitive market. “Telecom companies are now attempting to focus more on marketing and strategy,” said Amit Gupta, principal analyst for emerging markets at market researcher Ovum.
And it’s likely to be a busy year for telecom equipment and network vendors in India. “New operators need to roll out their networks soon and will seek support for these operations,” he said.
Network loads are poised to increase because of a steep rise in rural telephony services and increased data traffic once 3G services are in place this year. “Over the next four years, the market needs 50%-60% more capacity than what is now available,” Giri estimated.
State-run telecom services provider BSNL is also reportedly planning tender this month for the management of its fibre network.
But analysts say that contract is unlikely to be awarded soon because of resistance from employee unions. Thousands of jobs could be affected since a winning vendor is unlikely to take on all BSNL employees that maintain the cables now.
BSNL is also still involved in a controversy over a $10 billion tender for 93 million lines, awarded to Ericsson and Huawei. The tender has been delayed for a year and a half for reasons including Nokia Siemens challenging in court BSNL’s decision to disqualify its bid on technical grounds.
In December 2009, the tender was put on hold again after the Central Vigilance Commission launched a probe into BSNL’s post-tender price negotiations with the successful bidders, a practice forbidden by the commission. Telecom Minister A. Raja has now written to the Prime Minister’s Office asking for intervention to save the tender so BSNL can continue with its expansion.