India's largest private mobile services provider, Bharti Airtel, and Sweden's Ericsson have inked a $2 billion, two-year deal whereby the latter will help Bharti expand its telecom network as it looks to push into new rural markets.

The agreement, which is one of the largest ever secured by Ericsson, states that the Swedish telecom equipment supplier will design, plan, deploy and manage Bharti's GSM network across 15 circles and its pre-paid platform across 23 circles in the country.

Additionally, Ericsson will also deliver pan-India integrated device management solutions enabling usage of advanced data services by all mobile customers of Bharti across retail and enterprise segments.

This contract is an important part of realizing Bharti's vision of a converged network and of expanding coverage in rural India to launch innovative voice and data services for Indian consumers, Ericsson India Managing Director Mats Granyard said to the media after signing the deal.

We are honored that Bharti has chosen to partner with us in this grand venture that underpins our strategy of providing communication for all through sustainable and innovative solution, he added.

Bharti President and CEO Manoj Kohli said the partnership will enhance its network by offering its customers world-class products and a better experience through Ericsson’s global expertise.

This is the biggest deal our company has got into. It is a clear testimony to the big growth that is taking place in this market, Group Managing Director for Bharti Enterprises Akil Gupta said.

Telecom infrastructure has two components, the radio part and the core network. Ericsson will set up a core 2G, or second generation network along with a more advanced 3G network. However the radio part is only 2G. Therefore, for starting 3G services the company will have to float another tender for radio-enabled network, Gupta added.

Ericsson currently manages around 70 percent of Bharti's network across the 15 circles, a joint statement said.

Bharti also recently signed a similar $900 million deal with Nokia Siemens Networks (NSN) for eight telecom circles in the country.

Bharti Airtel had 42.68 million customers as of May, including 40.74 million mobile customers.

Meanwhile, Bharti has also bought back 4.99 percent direct stake in the Bharti Airtel from Vodafone thereby increasing its stake in Bharti Airtel to over 50 percent from around 46 percent.

Vodafone had 10 percent stake in the Bharti Airtel. Of this, 5.6 percent was direct and 4.4 percent was indirect. After Vodafone acquired a stake in Hutchison-Essar earlier this year, according to the telecom regulatory laws it had to dilute some of its stake in Airtel.

In February, Bharti and Vodafone signed an agreement according to which Bharti Group would buy back the 5.6 percent direct stake of Vodafone in Bharti Airtel Ltd. for $1.6 billion, on a deferred payment basis. Vodafone still has a 4.4 percent indirect stake in Bharti Airtel.

Indian mobile operators, competing in the world's fastest-growing mobile market, are constantly upgrading networks and services even as they expand into smaller towns and villages.

Reliance Communications Ltd., India's second-biggest mobile services provider, last week awarded two network expansion contracts worth more than $600 million to Alcatel-Lucent and China's Huawei Technologies.

Pursuant to the announcement made earlier in February 2007, Bharti is pleased to announce that one of its group companies has acquired a 4.99 percent direct interest in Bharti Airtel Limited from Vodafone. With this, Bharti has enhanced its voting interest in Bharti Airtel Ltd, to over 50 percent, a statement from the Bharti group said.