Tech Mahindra sells stake in Altiostar to Rakuten for nearly ₹331 crore

IT services major Tech Mahindra on Wednesday said its subsidiary has divested its stake in Altiostar Networks for $45 million (about ₹331 crore) to Rakuten USA, Inc.

Tech Mahindra has also inked an agreement with Rakuten Mobile, under which the Indian tech firm will be a preferred partner and provide technologies as well as software capabilities to support the development and deployment of mobile networks for global customers of Rakuten Communications Platform (RCP).

In a regulatory filing, Tech Mahindra said its subsidiary Tech Mahindra (Americas) Inc has divested its holding of 18,518,518 C1 preferred shares in Altiostar Networks.

"The buyer is Rakuten USA, Inc," the filing said, adding the consideration received from the sale is $45 million.

In 2018, Tech Mahindra had acquired 17.5% stake in the US-based telecom software development company Altiostar Networks for USD 15 million. Rakuten now owns majority stake in Altiostar.

Tech Mahindra Managing Director and CEO C P Gurnani said in the early part of the year, the company had launched a 4G network that was cloud native with Rakuten in Japan.

"Very soon, you will see, and I'm really talking very soon, you will see the first 5G network, which is again software defined and cloud native...And we believe that our commitment to Rakuten and to Altiostar continues to drive open and virtualise radio access networks," he told reporters in a virtual briefing.

He added that Tech Mahindra, with its large footprint and strong relationship with telcom firms around the world, would become a preferred partner.

Gurnani said the 5G market presents an opportunity worth a few hundred billion dollars. The company has divided the 5G ecosystem into three parts -- mobile service providers or various devices that are 5G enabled; 5G for communication service providers (telcos) trying to launch these services; and 5G for enterprises.

Through the agreement with Rakuten, Tech Mahindra will also provide managed IT, security and network services to Rakuten Mobile. There are also plans to designate Tech Mahindra as an official reseller of RCP.

Mickey Mikitani, chairman, president and CEO of Rakuten Inc, said with a common vision for digital transformation of the telecommunications industry, the company is very excited about the potential of the partnership with Tech Mahindra in bringing more agile, responsive and efficient services to customers around the world.

"RCP is the next stage in our journey...RCP is a next generation operator enabling platform that combines the technology blueprint and expert planning of Rakuten mobile and our world class partners to offer telecom companies and enterprise a way to easily build and deploy fully cloud native network at a speed and low cost," he added.

It is based on industry disrupting technology that is democratising mobile and making 5G deployment more competitive, he said.

Mikitani said its technology will reduce operating expense by more than 30 per cent and capital expenditure by more than 40 per cent, and added that this is an extraordinary reduction in cost of investment for companies who are trying to deploy 5G and 4G networks.

RCP was developed by Rakuten Mobile and is based on its new generation mobile network in Japan which combines the latest technology in virtualisation and automation, and is built on key secure operations principles.

Manish Vyas, President (Communications, Media & Entertainment Business) and CEO Network Services at Tech Mahindra, said the partnership with RCP presents a brilliant opportunity for an Indo-Japanese collaboration in creating technologies that not only can serve the Indian and global markets but can also enhance and speed up the ability of the Indian engineering power and innovation.

He added that a significant part of the R&D for RCP and technologies, including Altiostar, is happening in India.

"...so this partnership is a massive endorsement of the collaboration that can happen between India, Japan and the US," he said.