RCOM in talks with Accenture to float JV

Telecom operator Reliance Communications (RCOM) is in talks with IT services and consulting giant Accenture to float a joint venture to manage and operate the Anil Dhirubhai Ambani Group’s IT infrastructure services and processes.

The JV will be largely owned by RCOM and will have control over a business worth $1.5-2 billion, a person close to the negotiations said.

“Talks have been on for nearly two months for the joint venture. The proposed JV will also have an exit clause giving RCOM the opportunity to buy out Accenture in the future,” said sources.

ADAG’s IT team now employs about 600 people to cater to the IT needs of RCOM and other group companies such as Reliance Capital and Reliance Natural Resources. This task is expected to be done by the new JV, said sources.

RCOM is also said to be in talks with Hewlett Packard (HP), Germany’s T-Systems and French IT consulting giant Capgemini. HP declined to comment while 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 the RCOM offer because globally, it does not work on the JV model. Discussions with HP are in very early stages, sources added.

Telecom operators such as Bharti Airtel and Idea Cellular have shed non-core functions such as IT and network management to multinational giants such as IBM and Nokia in order to focus on the main function of selling services.

Accenture and HP, both globally renowned names in outsourcing, have not bagged any contract in the booming Indian telecom space. IBM is servicing Bharti Airtel as well as Idea Cellular in contracts worth over $1.2 billion and $600-800 million, respectively.

While IT outsourcing refers to hiring an outside agency to provide IT services to a company, insourcing is the in-house management of technology. ADAG is well known for not outsourcing its call centres, IT or networks management requirements despite industry trends to the contrary. Bharti Airtel, Hutchison Essar and Idea have outsourced most of these functions to specialists.

“Another model under consideration is hiving off the IT division and selling a minority stake to Accenture or any other interested party on the lines of the telecom tower business. The JV can then get business outside the ADA group too,” said industry sources.

With RCOM looking at cashing in on its IT assets, it floated a proposal to outsource IT services nearly three-four months back. Some firms including Accenture, Hewlett Packard and Germany’s T-Systems expressed interest in the contract, valued at around $1.5 billion. Subsequently, some officials in RCOM felt that they should consider some other models.

“As a result, the concept of JV was mooted where Accenture could give its services and expertise to RCOM’s manpower. It will give a steady revenue stream to the company’s JV partner and bring latest technological expertise to th