INDIA BUSINESS WORLD - DECEMBER 1^st - DECEMBER 15^th - 2007

IBM WINS 5-YR IT DEAL FROM VODAFONE

VODAFONE has announced that it will outsource all its IT operations of its Indian arm, Vodafone Essar, to IBM Corp for five years, but did not specify the value of the deal. Industry sources estimate the five-year contract to be worth up to $1.5 billion on a revenue share basis, although an independent confirmation of the figure could not be procured.

During an analyst call, Vodafone CEO Arun Sarin also said that Vodafone may not seek to monetise its share in Indus Towers, in which it holds a 42% stake. Vodafone Essar, Bharti and Idea Cellular had announced the formation of Indus Towers, pooling in their passive infrastructure together across 16 telecom circles to share 70,000 tower units in India to help all three players to save costs and capital as they expand their presence to rural India.

Mr Sarin also told analysts that Vodafone Essar was "fundamentally bang on plan" while also adding that the Indian unit was set to increase its market share to between 20-25% over the next couple of years, from about 17.5% currently.

The tie-up with IBM, Vodafone said, was part of several initiatives that it was undertaking to cut costs and help it ramp up its fast-growing Indian business. The other initiatives include sharing passive infrastructure with service providers Bharti and Idea with a committed capex of about $2 billion for the next fiscal, the company added. The announcements were made in London where Vodafone held an investor day focussing on its Indian unit, Vodafone Essar.

"Vodafone Essar is to outsource all its IT operations to IBM India in a deal designed to boost efficiency and further enhance its service to customers. The five-year agreement aims to ensure scalable, flexible and resilient IT support for the fast-paced roll-out of new network infrastructure, keeping pace with the rapid growth in Vodafone Essar's customer base. At the same time, the agreement is expected to lead to the faster roll-out of more varied services to customers while delivering greater cost efficiencies to Vodafone Essar," the company said in a statement.

Vodafone also added that while IBM India would manage all of Vodafone Essar's IT operations, including key applications such as billing and financial systems, the management of network service platforms was not part of the contract.

Following the deal, Vodafone Essar joins India's largest private operator Bharti Airtel, which has also outsourced its IT requirements to IBM. In March 2004, Bharti had signed a 10-year, $750-million IT outsourcing deal with IBM.