Alcatel bags Rs 1,400 cr RCom deal

French telecom infrastructure player Alcatel has bagged an approximately $350 million (roughly Rs 1,400 crore) contract from FLAG Telecom, a subsidiary of Reliance Communications (RCom), to build a fully IP-enabled Trans-Pacific undersea cable.

In September this year, FLAG had awarded Fujitsu a contract of approximately $700 million (around Rs 2,800 crore) to construct two of the four next generation network (NGN) cable systems.

These contracts follow the trend of Indian companies giving deals to IT and telecom multinationals. A couple of days ago, IBM India signed an estimated $600 billion 5-year outsourcing agreement with Vodafone Essar.

The company is already working with Bharti Enterprises and Idea has entered into pacts with some other Indian corporates. These, however, were outsourcing deals.

The Trans-Pacific Undersea cable, on the other hand, is part of the $1.5 billion (roughly Rs 6,000 crore) expansion plan of FLAG Telecom to add 50,000 km of new optic fibres to its 65,000 km long undersea cable network across the globe.

It spans around 11,000 Km, crossing the Pacific Ocean. The expansion plan is expected to be funded by internal accruals, pre-sales, cash flows and external debt. RCom has cash reserves of over Rs 12,000 crore.

The FLAG Network would cover 115,000 Km by 2010, once the $1.5 billion expansion plan is over. The Trans-Pacific route is the second busiest route after the Trans-Atlantic route for the undersea cable industry. It will link Japan and West Coast of the US.

"Worldwide, the global market for enterprise and institutional data services is a $90 billion (Rs 3,60,000 crore) market. With completion of the NGN cable, FLAG will be the only service provider to reach over 60 countries on a privately-owned cable system. We are leveraging RCom's strength as India's largest integrated and fully-converged communications service provider, Yipes' leadership in fast-growing Ethernet services in the US and FLAG's leadership in global data services," said a Reliance Communications spokesperson when contacted.

FLAG, which was a loss-making company, has seen a significant turnaround over the last two years. There have been strong market rumours in recent times about FLAG being in discussions with leading carriers and enterprises (including Google) for committed capacities on a "cable-in-cable" model. A FLAG spokesperson declined to divulge details on such pre-sales discussions.

The FLAG expansion plan announced in December 2006, comes at a time when the overall demand for undersea cable bandwidth is increasing.

Emerging technologies such as broadband internet, IPTV, and VoIP are increasingly gaining the attention of consumers and corporate businesses in a number of Asian economies. All these activities have helped to mobilise the once-stagnant international bandwidth market in Asia, say analysts.