Vodafone Idea (Vi) is reportedly nearing the end of its multi-year IT outsourcing deals, paving the way for new players to take over portions of the previous agreement with US tech company IBM. The new contracts are expected to be finalised in the next 10 days, Moneycontrol reported, citing sources close to the discussions. The renegotiated deal will reportedly reduce Vodafone Idea's dependence on IBM.
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More Vendors, Reduced IBM Dependency
Instead of renewing its entire deal with IBM, the telecom company will bring in multiple vendors to lower operational costs and increase efficiency, the report said.
The renegotiated deal will include specialised firms for specific tasks, while Tata Communications Transformation Services (TCTS) will handle limited managed services. TCTS had previously ended its contract with Vodafone Idea due to unpaid dues of Rs 221.19 crore.
“The deal is almost done and will be finalised within 10 days. Most components will be outsourced again, except for certain managed services handled by Tata Communications Transformation Services (TCTS). All transport and mobility are insourced in terms of network operations," the report said citing a source.
TCTS was mainly responsible for operating and maintaining Vodafone Idea's fiber assets. Tata Communications' unit terminated the contract after Vodafone Idea failed to clear dues of Rs 221.19 crore, which had increased from Rs 171.5 crore in March last year.
Cost Savings and Increased Efficiency
The previous five-year IT outsourcing contract with IBM, valued at USD 800 million, expired in April 2024. Sources say the renewed contract with IBM will be lower in value due to the addition of new vendors, according to the report.
“There will be a big discount on the deal size for Vodafone Idea compared to the previous deal with IBM. Vodafone Idea had broken up the RFP (request for proposal) to add new vendors. The telco will have more vendors under the new arrangement than a previous arrangement with just IBM," a second source was quoted as saying.
Reportedly, the goal of bringing in new vendors is to engage specialised providers in specific areas who can deliver better results at lower costs, the source added.
"These moves are expected to unlock cost and operational efficiencies and boost Vodafone Idea's productivity," the report said.
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Vodafone Idea's 4G and 5G Expansion Plans
The IT outsourcing deal renewal comes weeks after the telco concluded a USD 3.6 billion agreement with Nokia, Ericsson, and Samsung to secure 4G and 5G network equipment over three years. The IT outsourcing deal is crucial for Vodafone Idea as it aims to enhance its IT infrastructure to support its 4G network expansion and prepare for the planned 5G rollout in the top 100 cities within its 17 priority markets.
The network and the soon-to-be-finalised IT outsourcing deals are part of Vodafone Idea's three-year capex plan of USD 6.6 billion, aimed at expanding 4G population coverage from 1.03 billion to 1.5 billion and launching 5G in priority markets while increasing capacity, the report said.
