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Alcatel lands $1bn network contract from India's Reliance Comms

French networking giant Alcatel-Lucent has been awarded a $1 billion contract from India's third largest cellular carrier, which may stave off the company's financial decline.
Written by Zack Whittaker, Contributor

Mumbai, India-based Reliance Communications, the country's third largest phone giant with more than 130 million subscribers, has awarded an eight-year contract worth more than $1 billion to Paris, France-based networking giant Alcatel-Lucent.

For Alcatel, however, this contract will come as welcome news, considering the firm's ailing financial situation.

Alcatel already operates a joint venture with the Indian cellular giant to manage the carrier's network, reports Reuters which broke the news, under a five-year contract with $750 million. The new deal will see Alcatel's role expand to manage Reliance Comms.' mobile and fixed networks in east and south India.

Alcatel hopes the deal will cut costs and improve efficiency, the firm said, but declined to provide specifics.

Reliance Comms. is looking to cut costs by outsourcing the network management to the Franco-American firm. Around 4,000 employees -- around 15 percent of the Indian cellular giant's staff -- will join Alcatel-Lucent as part of the deal, Reliance Comms.' chief executive Gurdeep Singh said today.

It's not uncommon for Indian cellular firms to outsource their network management to third-party firms. Ericsson and Nokia Siemens Networks already have contracts with some of the country's largest cellular firms, as do Huawei and ZTE -- an area the latter two firms are keen to retain, considering the U.S.' position on the two Chinese firms. India, with a cellular population of close to 900 million, remains a lucrative region for Western firms to work in. 

Alcatel will be the next major telecoms and cellular equipment maker to join an Indian cellular giant, a country where the cell networks are erring on the side of developed, but much work needs to be done to cover not only the burgeoning population but also the vast land mass. 

The Paris, France-based firm, which generates around one-fifth of its revenue from outsourcing contracts, has suffered in recent quarters in the face of competition with rivals such as Ericsson.

Alcatel-Lucent reported a loss of $188 million on revenue of $2.64 billion during the third-quarter, close to a 3 percent drop year-on-year. Cash currently stands at $6.05bn at the end of the third quarter, after burning through $1.33bn during the first nine months up to the end of September. The firm's chief executive, Ben Veraayen, warned that the speed of the company's cost cutting "will have an impact on [its] cash position."

A month later, the firm received $2.1 billion in new financing from Credit Suisse and Goldman Sachs, after the networking giant said it needed the cash to extend its existing debt "over several years."

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