IBM set to get Bharti’s Africa biz

IBM set to get Bharti’s Africa biz

New Delhi: India’s largest mobile services provider Bharti Airtel Ltd announced on Friday that it has agreed in principle to outsource information technology (IT) requirements for its Africa operations to International Business Machines Corp. (IBM), in a deal that could be worth as much as $1.3 billion (Rs 5,980 crore), according to analysts.

The 10-year deal will cover all 16 countries in Africa where Bharti operates after it bought Kuwait-based Zain’s assets in the continent. IBM has been handling Bharti’s IT needs in India since 2004, a business estimated to be worth at least $2.5 billion.

“The deal is expected to be finally signed around the end of the third quarter," said a senior Bharti executive on condition of anonymity.

Bharti said in a release that the US-based firm will also deploy advanced technologies created by IBM Research, including Spoken Web—a voice-enabled Internet technology that allows users to access and share information by speaking over a phone line.

“This is particularly compelling for populations with little or no literacy, visual impairments, or which lack access to PCs (personal computers)," the statement added.

“Given the complexity of integrating and centralizing Bharti’s fragmented operations in 16 different geographies it has taken over from Zain, IBM was a natural choice as the telecom operator has already covered some distance with IBM on home ground," said Kamlesh Bhatia, principal research analyst at Gartner Inc. “Any other vendor would have been a surprise as very few have the scale and global delivery model that IBM has."

Besides IBM, Wipro Ltd, Tata Consultancy Services Ltd and Tech Mahindra Ltd were bidding for the project, according to a senior executive at one of the firms that had bid for the project and who did not want to be identified.

An analyst tracking the contract said IBM would be looking at a minium guaranteed contract value of $1.1-1.3 billion. The contract will include managing IT infrastructure (both software and hardware), managing value-added software as well as business process outsourcing operations. Apart from Bharti, IBM also works with Idea Cellular Ltd and Vodafone Essar Ltd in India.

Vodafone’s deal with IBM is valued at around $1.4 billion and Idea’s at $1 billion.

Aircel has outsourced its IT operations to Wipro for $0.7 billion as has Unitech Wireless Ltd for its Uninor brand for around $0.6 billion.

Bharti’s contract with IBM is likely to be structured along the lines of a risk-reward model, with its eventual value depending on how the technology vendor helps the telecom operator meet mutually agreed targets for operational performance.

“Integrating Bharti’s operations in Africa would not be much different from integrating and centralizing the IT framework in different telecom circles in India, as the scale of operations and subscriber base in Indian states would be easily comparable to the individual country markets in Africa," Bhatia said. “And on that front, IBM already has some experience."

Bhatia, however, agreed that Bharti also faces the risk of vendor lock-in, where it becomes completely dependent on IBM.

When asked for a comment on the deal with IBM, Manoj Kohli, head of international operations at Bharti, didn’t elaborate beyond saying: “More to come next month."

At the end of August, Airtel had at least 188 million customers across its operations in Africa, Sri Lanka, Bangladesh and India.

IBM will also build automated internal systems for Bharti to improve efficiency through applications that deliver processes and data on a real-time basis—both on PCs and mobile devices. The firm will also be responsible for deploying advanced information security systems that will provide privacy protection for customer data and enhance the resilience of enterprise systems against threats.

Bharti acquired operations in Burkina Faso, Chad, Congo-Brazzaville, Democratic Republic of Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Sierra Leone, Tanzania, Uganda and Zambia from Zain in a June deal that valued the assets at $10.7 billion. Bharti announced in August that it was merging its existing operations in Seychelles with the Africa operations.

Bharti is expected to announce its rebranding of the Africa operations next month.