The Swedish giant Ericsson (NASDAQ:ERIC, news, filings) announce this morning that they have won a $1B outsourcing contract in Southern Asia. Reliance Communications will be outsourcing the operation of a portion of both its wireless and wireline networks to them over the span of a $1B, eight-year managed services agreement.
If that sounds familiar, it's because it is. Four weeks ago Reliance awarded a similar $1B outsourcing contract to Alcatel-Lucent. The breakdown is that Ericsson will be taking over Reliance's network in the North and West of India, looking after 100,000 miles of fiber and mobile infrastructure across 11 of the country's telecom 'circles' including Delhi and Mumbai. For its part, Alcatel-Lucent will be handling the South and East.
Ericsson will be taking on some 5,000 of Reliance's employees in India, which will give them a range of new opportunities as Ericsson continues to expand its managed services business. They've been one of the most active vendors in taking on such outsourcing projects, and last year they did a similar deal with India's Idea Cellular.
As for Reliance, this contract will help it reconfigure its business model by streamlining and stabilizing its cost structure. The company has been straining under the weight of its debt load for a while now. Last year they tried to IPO their submarine cable division in Singapore, but had to drop the idea in the face of underwhelming demand.
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