Mumbai: India’s fifth-largest mobile telephony firm, Idea Cellular, has signed a $600-800 million deal with IBM, under which the world’s largest technology services firm will manage Idea’s IT function.
The deal, first reported by Mint on 9 March, will be spread over 10 years, and is the second such deal IBM is signing with an Indian telco. IBM already has a 10-year $1 billion IT outsourcing deal with Bharti Airtel and its managing director said there was no question of a conflict of interest.
“Depending on the requirements of the telecom companies, each of our business models is unique,” said Shankar Annaswamy, managing director, IBM (India and South Asia). “The business model for Idea Cellular will be different from Bharti Airtel as its scale of business is different,” he said.
Idea Cellular, part of the $12 billion Aditya Birla Group, has 14 million subscribers, up from 7.3 million in March 2006. It currently operates in 11 out of the 23 telecom circles into which the country is divided and plans to enter two more, including the lucrative Mumbai by the end of 2007. It has also applied for licences for the other 10 circles.
“Our IT systems have never been equipped for such a large-scale business as we are looking at now,” said Idea Cellular managing director Sanjeev Aga. “In such a scenario, we have tied up with IBM.”
Bharti was among the first telcos in the world to outsource its entire IT function to a vendor, although the trend itself has been around for at least a decade (it is popular among manufacturing firms). Bharti is the country’s largest mobile telephony firm with over 32 million subscribers.
IT outsourcing deals usually require the vendor to take over the staff of the client’s IT department and this is what IBM will do in this case too. Around 200 employees of Idea will join IBM; 50-60 will continue with Idea to look after its IT strategy and relationship management.
“After getting the people from Idea Cellular, we will further ramp up the team to cater to the growing needs of the company,” said IBM vice-president and general manager for communications sector (Asia Pacific) Ramesh Awatney.
The outsourcing deal includes business processes and IT infrastructure. It will support end-to-end transformation of business, including critical processes such as billing, revenue assurance, credit collection, subscriber management, business intelligence, fraud management, customer relationship management, e- billing and customer care. IBM will also undertake the management and support of Idea’s physical IT infrastructure.
Last month, Idea Cellular raised roughly Rs2,150 crore through an initial public offering. On Wednesday, the company’s share fell 0.80% to close at Rs93.05 on the Bombay Stock Exchange, whose 30-stock index, Sensex, rose 1.89%