RCOM IN TALKS WITH ACCENTURE TO FLOAT JV

June 19, 2007

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RCOM IN TALKS WITH ACCENTURE TO FLOAT JV

Rashmi Pratap, MumbaiThe Economic Times

Telecom operator Reliance Communications (RCOM) is in talks with ITservices and consulting giant Accenture to float a joint venture to manageand operate the Anil Dhirubhai Ambani Group’s IT infrastructure servicesand processes.
The JV will be largely owned by RCOM and will have control over a businessworth $1.5-2 billion, a person close to the negotiations said.
“Talks have been on for nearly two months for the joint venture. Theproposed JV will also have an exit clause giving RCOM the opportunity tobuy out Accenture in the future,” said sources.
ADAG’s IT team now employs about 600 people to cater to the IT needs ofRCOM and other group companies such as Reliance Capital and RelianceNatural Resources. This task is expected to be done by the new JV, saidsources.
RCOM is also said to be in talks with Hewlett Packard (HP), Germany’sT-Systems and French IT consulting giant Capgemini. HP declined to commentwhile Accenture was unreachable for comment. An RCOM spokesperson said,“We do not comment on speculation.”
Accenture, however, is learnt to be taking its time in responding to theRCOM offer because globally, it does not work on the JV model. Discussionswith HP are in very early stages, sources added.
Telecom operators such as Bharti Airtel and Idea Cellular have shednon-core functions such as IT and network management to multinationalgiants such as IBM and Nokia in order to focus on the main function ofselling services.
Accenture and HP, both globally renowned names in outsourcing, have notbagged any contract in the booming Indian telecom space. IBM is servicingBharti Airtel as well as Idea Cellular in contracts worth over $1.2billion and $600-800 million, respectively.
While IT outsourcing refers to hiring an outside agency to provide ITservices to a company, insourcing is the in-house management oftechnology. ADAG is well known for not outsourcing its call centres, IT ornetworks management requirements despite industry trends to the contrary.Bharti Airtel, Hutchison Essar and Idea have outsourced most of thesefunctions to specialists.
“Another model under consideration is hiving off the IT division andselling a minority stake to Accenture or any other interested party on thelines of the telecom tower business. The JV can then get business outsidethe ADA group too,” said industry sources.
With RCOM looking at cashing in on its IT assets, it floated a proposal tooutsource IT services nearly three-four months back. Some firms includingAccenture, Hewlett Packard and Germany’s T-Systems expressed interest inthe contract, valued at around $1.5 billion. Subsequently, some officialsin RCOM felt that they should consider some other models.http://economictimes.indiatimes.com/News/News_By_Industry/Telecom/RCOM_in_talks_with_Accenture_to_float_JV/articleshow/2132891.cms