Ericsson Wins $1 Billion Services Deal From India’s Reliance

Ericsson AB, the world’s largest maker of wireless networks, won a $1 billion contract to manage the systems of Indian phone operator Reliance Communications Ltd., expanding its services business in Asia.

About 5,000 Reliance employees will transfer to Ericsson as part of the eight-year contract, according to a statement today from the Stockholm-based company. Ericsson will operate and manage Reliance’s wireline and wireless networks in the northern and western states of India.

Ericsson is trying to sell more services such as network management and maintenance as wireless operators in Europe curb infrastructure investment amid contracting economies and increasing competition. Last year, Ericsson’s services revenue expanded 16 percent as network-equipment sales fell 11 percent.

Reliance, which awarded a $1 billion services contract to French phone-equipment maker Alcatel-Lucent SA last month, is signing such deals to reduce the cost of running its networks. Network costs will probably drop 8 percent to 10 percent this year, helped by outsourcing deals, Gurdeep Singh, the head of Reliance’s wireless business, said Jan. 24. Network costs last fiscal year totaled $1.3 billion, according to data compiled by Bloomberg.

Shares of Ericsson rose 0.7 percent to 78.10 kronor at 10:02 a.m. in Stockholm. Reliance, India’s third-largest mobile- phone company by subscribers, advanced 0.5 percent to 75.6 rupees in Mumbai.

To contact the reporter on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net