Bharti, Ericsson in $400m network outsourcing deal

Ericsson to manage Airtel's network in 13 circles for three years

Bharti Tele-Ventures signed a $400 million contract with Swedish technology provider Ericsson to outsource the management of its cellular network, Airtel.

In the first such deal in the world, Ericsson will provide, manage and maintain the equipment as well as provide quality assurance in Airtel's 13 mobile circles for three years. Bharti is also planning to raise $500-600 million abroad in the next financial year.

Following the deal, around 250 Bharti employees working on planning and designing of the company's network will be absorbed by Ericsson.

Bharti has borrowed $300 million from ABN Amro Bank to fund the project. Swedish export credit agency EKN is the guarantor for the loan. The overall cost of funding, including hedging costs, is around 4 per cent. The company is in talks with Motorola and Siemens for similar arrangements in its remaining three circles.

"I do not think we have Ericsson's expertise in managing networks. The agreement will allow us to focus on our core strengths, even as it gives us economies of scale and significantly improved cash flow," Akhil Gupta, joint managing director of the Bharti group, said. He, however, did not elaborate on the cost savings estimated from the move.

Manoj Kohli, president (mobility), Bharti Tele-Ventures, said, "We will channel our resources to product innovation, value-added services, marketing, branding and pricing, even as we leverage Ericsson's expertise in network management."

Ericsson India Managing Director Jan Campbell said, "The impact of the agreement will be felt by consumers in a few months. We expect other operators to work out similar arrangements with equipment vendors."