Outsourcing Age

Ericsson Lands China Mobile Deal

Author: OutsourcingAge Editor

In the largest outsourcing deal of its kind to date in the Asia-Pacific Region, Ericsson said it will take over network operations and management for China Mobile in Hebei Province, China – a region of 70 million people surrounding Beijing, the capital.

The deal marks a triumph for Ericsson, whose fastest-growing business is its network outsourcing division, but which has struggled to strike such deals in China, where stringent worker-protection laws make it difficult to lay off employees affected by outsourcing agreements.

Under the three-year contract, Ericsson, the world’s largest wireless network equipment vendor, will maintain 22,000 base stations for China Mobile Hebei, a regional unit of China’s No. 1 mobile operator. The China Mobile deal comes almost exactly one year after Sprint Nextel handed Ericsson a $5 billion managed-services contract to handle day-to-day operations of the Sprint network. Ericsson has such network management contracts with carriers around the globe including Brasil Telecom (BTM), Saudi Telecom, Hutchison Telecom in Hong Kong, T-Mobile’s U.K. division, Vodafone U.K., and Cable & Wireless, which has operations in Europe and Asia.

In a 2009 study entitled “Redefining the Core: Outsourcing and the Virtual Telco,” Yankee Group analyst Camille Mendler predicted that carriers will spend $145 billion on outsourcing and managed services over the next five years.

Earlier this year, Ericsson signed $1.8 billion worth of 2G and 3G contracts with China Mobile and China Unicom Ltd. In 2009, China comprised Ericsson’s second-largest market, after the United States, making up 10 percent of Ericsson’s $8 billion in sales, compared to 8 percent in 2008. That growth stems from the skyrocketing number of mobile subscriptions in China, which reached 747 million last year, Ericsson said, with a penetration rate of 56.3 percent.

Growth is slowing on the mainland, however, as operators near completion of extensive network buildouts – making outsourcing contracts like the China Mobile Hebei all the more valuable.

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Tags: Business Process Outsourcing, Infrastructure Issues, IT, Outsourcing Provider, Outsourcing Services, Strategic Outsourcing

This entry was posted on Friday, July 23rd, 2010 at 1:01 am and is filed under Company News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.