Bharti just announced a $500 Million deal with Alcatel-Lucent. The relevant part is quoted below:
Telecom major Bharti Airtel Thursday awarded a $500-million deal to Alcatel-Lucent for outsourcing the management and servicing of its broadband and fixed line network for five years.
The deal involves creation of a joint venture with Alcatel Lucent holding 76 percent of the equity, and Bharti having the remainder 24 percent.
I think this is a much better deal for Bharti than for Alcatel-Lucent. They get the brand name and the customer relationship, while only putting in 24% of the skin in the game, offloading the majority of the cost to Alcatel-Lucent. While I am not familiar with the exact structure of the deal, I am going to assume that the cost is going to be heavily front loaded to set up the integration, test, qualification, design and operations organizations and processes, plus the core CAPEX for equipment, CPE purchases and so on. The Alcatel-Lucent guys are thinking they are going to recover the cost towards the 2nd half of the contract (think of this as the vendor financing equivalent of forward pricing). Taking a look at the past, we have Cisco funding Cogent. So, to cut the story short, I think this deal is going to be either a huge disaster for all involved, or failing that, Alcatel-Lucent is going to be losing their shirt.
See you in 3 years and we can do a checkpoint.