Reliance outsources network operations to Ericsson in $1 billion agreement

Reliance Communications announced on Monday it is outsourcing its network operations to Ericsson (Nasdaq: ERIC) in a $1 billion managed, eight-year services contract covering its wireline and wireless networks located in north and west India.

This is the second outsourcing deal that Reliance has signed in recent weeks, having struck a similar agreement with Alcatel-Lucent (NYSE: ALU) last month. Ericsson will oversee 100,000 km of fiber and mobile infrastructure in 11 of Reliance's "telecom circles" across North and West of India, including Delhi and Mumbai, while Alcatel-Lucent will handle the service provider's eastern and southern India networks.

For Ericsson, the deal is another proof point of its growing professional services strategy. Like Alcatel-Lucent, Ericsson has been expanding its services and OSS divisions both organically and through various acquisitions including ConceptWave and Telcordia.

As it has done in other managed services contracts, including one it signed with Sprint (NYSE: S) in 2009, 5,000 of Reliance's employees will join Ericsson. Under Ericsson's direction, these employees will continue to oversee various functions including field maintenance, network operations and operational planning.

By handing off these functions to Ericsson, Reliance will be able to focus on its core business and improving the user experience for its consumer and business customers. The service provider's network infrastructure covers 24,000 towns and 600,000 villages in India over which it offers a set of converged services including voice, data and video.

A key point of this agreement is that Ericsson will streamline Reliance Communications' operations by bringing all aspects of fiber, tower operations, wireless networks and wireline access networks to the service provider's wireless and global enterprise business, across differentiated product lines. In addition, Ericsson will update the tools, processes, and best practices across all of Reliance's business lines.  

Outsourcing its operations to Ericsson comes at a time when Reliance is trying to streamline costs and reduce its debt load. Last July, the service provider abandoned its effort to conduct an IPO for its FLAG submarine cable unit due to what it said at the time were  "unfavorable" market conditions. 

For more:
- see the release

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