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Georgina Lee

Group contracts network management to Nokia to cut costs before listing unit

Hutchison Telecommunications International Ltd (HTIL) is shedding 600 employees from its Indian flagship, Hutchison Essar, by outsourcing its network management to Nokia to save on costs before its  initial public offering this year.

It was not clear how many of the staff would be re-engaged by the Finnish mobile giant, which said yesterday it had won a five-year managed-services agreement to run Hutchison Essar's 2G network in nine of its 16 'circles' or service regions in India.

Hutchison Essar, owned 53.1 per cent by HTIL, is targeting a float on the Mumbai stock exchange this year. In June 2004,  it had about 4,000 employees, data shows.

The move also came amid the firm's expansion in the emerging market, which is expected to grow  into Asia's second-largest mobile market after China. Analysts expect India's 5 per cent penetration rate - or 51.5 million mobile users - to grow to 12 per cent by 2008, or 138.31 million.

HTIL has completed its acquisition of BPL Mobile Cellular, adding three circles and 13 million users.

Sources said HTIL expected to complete the acquisition of Mumbai-focused BPL Mobile Communications by June and then add seven more licences by buying Essar Spacetel, so that it would cover the whole of India's 23 circles.

Rajeev Suri, Nokia's vice-president of networks, said his company secured the outsourcing deal from three competing rivals. 'This contract is our largest managed-services agreement signed in terms of number  of people [that Nokia has taken over from a mobile operator],' said Mr Suri, who refused to disclose the contract value.

Such business makes up about 30 per cent of Nokia's revenue.

Nokia will assume operation of the GSM mobile network in nine circles - Gujarat, Karnataka, Andhra Pradesh, Chennai, east and west Uttar Pradesh, Rajasthan, Haryana and West Bengal.

Nokia would also help Hutchison Essar expand its network into  uncovered rural areas in the nine circles, Mr Suri said.

He  said Nokia might also bid for the mobile operator's future outsourcing deal in the remaining seven circles.

Dennis Lui Pok-man, the chief executive of HTIL, has said the group plans to spin off 10 per cent of Hutchison Essar this year.

India is HTIL's most profitable market in its  seven operating markets portfolio. For the first half of last year, its operating profit before depreciation and amortisation was $1.58 billion.

HTIL and its 69.1 per cent parent, Hutchison Whampoa, are frequent shoppers for network outsourcing deals.

Last month, HTIL's 3 Hong Kong outsourced its information technology department to Swedish giant Ericsson, removing 115 employees from its payroll. 3 Italia also outsourced its 3G network to Ericsson in a seven-year deal valued at US$2.5 billion. More than 1,000 staff of 3 UK were transferred to Ericsson.

Analysts said network outsourcing  cut the mobile firm's operating costs, boosting  their income statements and, thus, Hutchison Essar's impending float, by taking costly  staff off their payrolls.

Cutting cleanly

Nokia wins deal to manage nine service regions in India

The Indian unit is targeting a listing in Mumbai this year

The job cuts come amid HTIL's continuing Indian expansion



Hutchison axes 600 jobs at Indian flagship