New Delhi: South African phone firm MTN Group Ltd has approached International Business Machines Corp., or IBM, to provide information technology support and services in a deal estimated to cost $2 billion (Rs9,200 crore) and modelled on the work the US company has done for three Indian cellphone operators.
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A deal between the Johannesburg-listed firm, which aims to be a top 10 global telecom company through tie-ups in countries such as India and Mexico, and IBM is likely to be signed by the end of this year, according to a person close to the development.
About 250 engineers will be drawn for the project across the globe, but the majority will be from India given their expertise in such projects, said the person who declined to be identified because the deal is still being worked out. An agreement is expected to be signed by the end of 2008, the same person said.
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The deal envisages a complete overhaul of MTN’s information technology (IT) systems in three phases: business process re-engineering, systems transformation and IT operations. IBM, the world’s biggest IT company, will recommend more efficient processes, integrate stand-alone technologies with the main MTN system, and finally take over the African phone firm’s entire IT operations under the proposed deal.
For MTN, the tie-up could result in cost savings, help it manage customer churn, add new subscribers and get to the market with new services faster than its competitors, analysts say.
“A simple billing application could take up an entire IT department (in a phone firm). If they can get rid of that, they will get big savings,” said Sabyasachi S. Satyaprasad, research director at offshore advisory firm NeoIT. “IBM has past experience in total transformation outsourcing, this could be that,” he said.
The US firm has executed several telecom projects globally, but has implemented only three so-called end-to-end IT infrastructure transformation projects so far, all of them in India.
IBM executed a $1.4 billion IT infrastructure project for India’s largest cellphone operator, Bharti Airtel Ltd, while its work for Vodafone Essar Ltd (formerly Hutchison Essar Ltd) was billed at $1.2 billion and Idea Cellular Ltd at $900 million, the same person close to the development added.
“We do not comment on rumours or speculation,” said a spokesman for IBM India on the talks with MTN.
“The MTN Group does not comment on market speculation,” Nozipho January-Bardill, MTN’s group executive for corporate affairs, said in an email.
IBM is already one of the technology service providers that manages MTN’s IT infrastructure.
MTN wants the entire project, which typically takes two-three years to emerge from the drawing board and get completed, to be implemented in six months, the person mentioned earlier said. IBM will be able to complete the project in such a short time because of its Bharti Airtel experience. The analysis and design phase will not be required and the project will start directly from the implementation stage, he added.
The project will involve sourcing software and products such as switch nodes for GSM mobile phone technology standard, from companies such as Oracle Corp., Comverse Technology Inc., Nokia Oyj, Ericsson and Huwaei Technologies Co.
MTN got first-hand experience of Bharti Airtel’s IT infrastructure when the Indian company approached the African phone firm in May for a possible merger. The deal fell through as did MTN’s talks later with Reliance Communications Ltd, the country’s second biggest mobile phone services provider.
For Bharti Airtel, IBM manages its entire IT infrastructure, and in January this year signed a $150 million deal to provide a platform to broadcast services such as DTH (direct to home) television and IPTV (Internet protocol TV).
Raghu Krishnan in Bangalore contributed to this story.