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IBM has a big Idea
Outsourcing deal valued at $800m

Mumbai, March 21: Idea Cellular, India’s fifth-largest mobile phone firm, signed a 10-year pact on Wednesday to outsource some of its operations to IBM in a deal valued at up to $800 million.

The Indian unit of IBM will manage and support Idea’s information technology infrastructure and other services, including billing and customer management on a revenue-sharing basis, the cellular operator said.

Idea is part of the AV Birla group and was recently listed on the bourses. The pact between IBM and the company is a ‘risk-reward sharing model’ with the value of the order depending on Idea’s revenues and circle expansion. The contract starts from April 1 and will be completed in phases.

This is the second major deal bagged by IBM in India’s wireless telephony space.

In 2004, IBM had entered into a 10-year, $750-million deal with Bharti Airtel to manage the latter’s IT infrastructure.

Domestic cellular companies have been outsourcing various activities to experts so that they can focus on their core activities.

IBM will take over Idea’s existing infrastructure and even transform it in some cases by bringing in new technologies. It will also look into other services like billing, customer care management, revenue assurance and credit collection, e-billing and payment and data management. The deal will result in around 200 information technology staff at Idea moving over to IBM.

According to Idea, the 10-year business transformation will “integrate, innovate and transform” its business process and IT infrastructure. It will cover all of its existing operations and potential additions. Idea Cellular now operates in 13 circles and has a customer base of more than 14 million. It is now planning to enter Mumbai, Bihar and Jharkhand circles.

Sanjeev Aga, managing director, Idea Cellular, said the deal would enable the company to contain its costs even as it will usher in various other benefits.

Mobile operators like Bharti Airtel, Reliance Communications and Tata Teleservices have been on course to demerge their tower business and let other companies manage them.

Idea Cellular, too, is considering a similar move, though a final decision has not yet been reached.

It’s not only Indian telecom companies that are outsourcing. Vodafone Group Plc, which now has a major stake in Hutchison Essar, had in 2006 announced that EDS and IBM would manage its application development and maintenance services in a global IT outsourcing deal.

IBM is looking forward to working with Vodafone in India once the UK-based telecom major’s deal with Hutch Essar is completed.

“IBM can work with Vodafone in India but we are yet to receive a call,” said Ramesh Awtaney, IBM’s vice-president (communication sector) for the Asia Pacific.

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