Bharti Airtel outsources Value Added Services to Comviva

Bharti Airtel has contracted Comviva, a managed services company, to manage its value added services portfolio. Bharti has been the leader in outsourcing crucial functions, changing the way the telecom industry in India operated. Here it seems to have taken a big leap of faith, outsourcing the crucial function of providing value added services. Perhaps, what gives it confidence is that Comviva has the Bharti group itself as the key promoter, giving it oversight over the company’s functioning.

Coming to the agreement, very few details have been mentioned and no financial details have been disclosed. It’s a three-year deal and Comviva will manage about 2000 VAS nodes across the country. In a managed services transaction, the company will typically take over the operational aspects of providing value added services to Bharti’s subscribers. VAS broadly covers everything other than the basic function of providing subscribers with a facility to make voice calls. The most basic form of VAS is the messaging or SMS service. Atul Bindal, president, Mobile Services, Bharti Airtel, said the deal will provide a competitive edge and improve the speed of rollout, number of services offered and quality.

As voice becomes a commodity market, mobile service companies focus on value added services. While voice calls provide a base, the other services provide a more profitable revenue stream. Some years ago, the number of value added services were few, so companies could handle them easily. Now, there are many as new services become available, and operators have started pushing them to customers. Once 3G technology becomes available for deployment, there will be a new range of services on offer.

Value added services contribute about 9% to Bharti’s mobile revenues.

That translates to an inevitable increase in investments in people, technology and hardware to provide these services. Bharti has, instead, decided to outsource the operational part of the process, focusing on product development and marketing. Bharti has the advantage of outsourcing a critical function and ensuring that it succeeds in its objectives. It is likely to succeed this time around too. It has the added insurance of its promoter group being the main investor in the company.

Comviva was set up in 1999 and in April 2009, its name was changed from Bharti Telesoft to Comviva. In 2005, it raised $13.5mn from a group of investors including Sequoia Capital (this was Sequoia’s first investment in an Indian company), Westbridge Capital Investors and Cisco Systems. It had earlier raised $3.3mn in funds from the founders and Bharti Enterprises. More about the fund raising exercise can be found here.

The Bharti group is the key investor in the company, with three directors from the group –Rakesh Bharti Mittal, Akhil Gupta and Sarvjit Singh Dhillon- on Comviva’s board. Manoranjan Mohapatra is the CEO of the company.

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