India’s top mobile phone firm Bharti Airtel took the initial steps to replicate its hugely successful outsourcing model in Africa by awarding a $1.5-billion contract to IBM for managing its IT requirements across 16 countries in the continent.
Under the proposed 10-year contract–estimated to be worth more than $1 billion by an analyst–IBM will consolidate Bharti Airtel’s information technology operations in the 16 African countries into one integrated system.
IBM will also oversee the management of all of the technology applications, data-center operations, servers, storage and desktop services, the companies said in a joint statement.
The contract is expected to be finalized in the fourth quarter, they said, without providing any financial details.
“The deal is estimated to be anywhere between $1.00 billion and $1.30 billion,” said Kamlesh Bhatia, principal analyst at research firm Gartner Inc. “It’s a good deal for Bharti, as it needs operational stability when it enters Africa…which is extremely fragmented.”
IBM is already providing IT services to Bharti Airtel in India, where the telecom company has more than 140 million mobile subscribers. In Africa, the Indian company is looking to replicate its expertise at home in wringing profits from telephone call charges as low as 1 cent a minute.
Bharti Airtel is trying to lower the entry barrier for the African people to own a mobile device, the Indian company said in the statement.
Bharti Airtel entered the African market through its recent $9 billion acquisition of Kuwait-based Mobile Telecommunications Co.’s assets in the continent, in a bid to expand its business to offset the effects of stiff competition at home in India.
It has about 45 million subscribers in Africa, where the average telecom penetration is lower than in India. The company’s Africa operations are spread across Burkina Faso, Chad, Congo Brazzaville, Democratic Republic of Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Seychelles, Sierra Leone, Tanzania, Uganda and Zambia.
The partnership with IBM will help Bharti Airtel scale its network and systems to more than 100 million African customers by 2012, it added.
Bharti Airtel’s contract with IBM in India was signed at $750 million in 2004, but it has now grown to more than $2 billion, Gartner’s Bhatia said, indicating the scale to which the latest deal could grow in the long run.
Bharti will expand to more African countries providing business opportunities to IBM to tap the continent.
The partnership will allow Bharti Airtel to deliver innovative and affordable 2G and 3G mobile services across the African continent. IBM will also oversee the management of all of the technology applications, data-center, operations, servers, storage and desktop services, both companies added in a joint statement. The contract will be finalized in the fourth quarter.