RCom to award $3 billion managed services deal to a single vendor

February 21, 2012: Reliance Communication has decided to outsource managed services to a single vendor. The contract is worth Rs 15,000 crores or USD 3 billion. Unlike any other service providers in India, Reliance communication outsources their functions to only a single service provider. The company is in the final stages of outsourcing and has shortlisted leading service providers such as Ericsson and Huawei Technologies. Alcatel-Lucent is also in the list and presently in a Joint venture with RCom. ZTE is also among the contenders. The period of contract extends to five years.

The contract which is worth USD 3 billion will be signed with a single vendor, a trend which is not observed in the telecom industry. Leading players such as Airtel and Vodafone has multiple vendors for managed services.

The contract would include outsourcing of end-to-end management services such as operational planning of network, which is usually performed by the telecom company itself. The other activities that will be outsourced includes handling GSM, CDMA and wired networks, fiber optics, IP, and quality assurance. Business functions such as Information Technology and Customer service will not form a part of the contract.

It is said that the final decision on the contract will be made within 4 to 5 weeks. Sources in the industry say that the contract will include the transfer of major portion of the 15,000 employees of RCom to the service provider who wins the contract.

Presently, RCom is in joint venture with Alcatel-Lucent, with 67 per cent stake in the hands of the later. The JV is meant to cater to the infrastructure needs of the RCom. The JV came into existence in 2008, and it was forecasted that the value of the managed services will be USD 16 billion. The JV was created to cater to the needs of RCom and to serve other clients across the world.

It is said that RCom will end its JV with Alcatel-Lucent if it fails to enter into the new deal. RCom does not wish to enter into JV with the service provider to which it will outsource its functions.

By outsourcing end to end services, RCom will be able to cut cost by 15 to 20 %. RCom wants to have service providers to provide service at each site rather than overall service. This is expected to improve the quality of service. Discussions are underway on the specific requirement of RCom with the shortlisted service providers.

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