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TECH Mahindra has pipped IBM and Wipro to bag around $500 million outsourcing contract from new telecom entrant Swan Telecom. Tech Mahindra is expected to to sign a contract with Swan in the next few days.

Tech Mahindra had initially partnered with networking equipment vendor, Ericsson, to execute the IT portion of the deal. However, it later decided to bid separately for the end-to-end IT outsourcing contract. A letter of Intent (LoI) was issued to Tech Mahindra some days back, a person involved with the contract said on conditions of anonymity.

"The contract is to be delivered over 10 years,” he added. This will be one of the first large wins for Tech Mahindra in the competitive domestic telecom market. A few months ago, Wipro had bagged a Rs 2,500 crore total outsourcing contract from another new entrant, Unitech Wireless.

It’s not clear if Ericsson will now execute only the networking equipment part of the contract.

Officials from Emirates Telecommunications, or Etisalat also participated in the decision making, the person quoted earlier added. Etisalat had acquired a 45% stake in Swan for $900 million last year. Tech Mahindra has an existing relationship with Etisalat and is the vendor for some of its contracts in the Middle East.

Telecom contracts in the Indian market have become closely contested because of the high growth potential of the sector. IBM’s contract with Bharti Airtel was the first such total outsourcing deal in telecom where the IT service provider’s revenue was linked to the revenue growth of the telecom operator. The strategy paid off for IBM and it was also able to follow it up with similar outsourcing contracts from Vodafone and Idea Cellular.

Tech Mahindra is working on Etisalat’s greenfield project in Egypt, Nigeria and Tanzania in partnership with networking equipment vendors. In February last year, it had won Etisalat’s Egypt contract along with Ericsson.

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