RCom, Ericsson make $1bn managed services deal

Reliance Communications has done it again. A month after closing a billion dollar deal with Alcatel Lucent, Reliance Communications has signed another one billion dollar deal with Ericcson. CNBC-TV18’s Kritika Saxena reports.

Anil Ambani's Reliance Communications is trying to kill two birds with one stone -- cut costs, and enhance customer experience. In what is the second billion dollar managed services deal in the telecom space in recent times, RCom has farmed out its managed network services to Ericcson.

Incidentally, the first billion dollar deal in this space was also sealed by RCom with Alcatel Lucent. So Ericcson will be responsible for RCom's managed network services spanning 100,000 kilometres of fiber and mobile infrastructure in 11 telecom circles. But the two deals have some key differences.

While both deals have an 8-year tenure, RCom's deal with Alcatel Lucent will cover the eastern and southern regions of India, while its deal with Ericsson covers the northern and western regions.

Also, while only 4,000 RCom employees would move to Alcatel Lucent, the deal with Ericcson will see 5,000 RCom employees make the move. 

The reason the Ericcson deal needs more manpower is because the northern and western regions of India include Delhi and Mumbai, which are not only larger by size, but also a key market for RCom. These two deals will not only streamline RCom's wireless, wire line, tower and enterprise operations, they will also help RCom increase its margins. However, experts say that the impact of this process will reflect in RCom's books only after two quarters.