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Teledensity in general in India is still low, but in 2004 the number of mobile subscribers overtook the number of landline subscribers. At the time of the managed-capacity deal with Ericsson in March 2004, the mobile penetration rate in India was still low, but a convergence of factors fuelled by a healthy annual GDP growth rate of 6 percent or more since 1990 (8.3 percent in 2003, 6.9 percent in 2004) had made the market ripe for growth.

Already the GSM market leader, Bharti hoped to use the situation it found itself in back in 2004 to consolidate its market position. But to do so, Bharti knew it needed to grow its network fast to cope with the demand generated by such rapid growth in a market with many competitors and falling tariffs. At the same time, Bharti wanted to migrate from a price- to quality-based competitive edge in the market, and to start providing such value-added services as WAP, mobile office and content subscriptions.

A tall order, and unusual times called for unusual solutions. In a move that has become famous in the telecom world, Bharti chose to hand over the entire operation, maintenance and capacity expansion of its network to Ericsson in a deal that involved risk-and-reward sharing between the operator and supplier. Bharti would order new capacity when and where it was needed, and Ericsson would supply it and manage day-today operations. The managed-capacity model eliminates overlap and duplication of roles between the two companies and ensures cost-effective deployment of capacity to meet the demand generated by strong growth.

As Gupta said at the time: "If you want to have great networks, you don't need periodic optimization, you need continuous activity. I do not think we have Ericsson's expertise in managing networks. The deal allows us to focus on our core strengths, even as it gives us economies of scale and significantly improved cash flow."

Ericsson also absorbed around 500 technical staff from Bharti into its India operations.

Don Price, group CTO at Bharti, says: "We have been working arm-in-arm with Ericsson for the last year and a half to really develop this model. It really is a paradigm shift for the industry – the first time the objectives of the operator and the strategic partner were completely aligned."

And this alignment seems to have paid off. The market did grow, at the rate of close to 2 million subscribers per month, topping 51 million by the start of 2005.

Bharti's share price more than doubled within a year, end-user satisfaction and subscriber retention increased, and Bharti has been able to add more value-added services faster. Perhaps the most telling statistic for the success of this managed-capacity arrangement is the around 40 percent of subscriber net adds for Bharti over the past 12 months.

In addition, Ericsson’s managed-capacity deal with Bharti meant that the operator could rapidly expand its footprint to cover all the circles of India by early 2005 - a step in the right direction for Communication for All – one of Ericsson’s own visions for our globalized world.