BSNL Threatens to Ban Huawei

Light Reading
News Analysis
Light Reading
10/26/2005



It's been one problem after another for Huawei Technologies Co. Ltd.'s Indian operations.

The Chinese equipment vendor has been repeatedly set back by the Indian government's security concerns, and now it could be banned altogether from bidding on contracts issued by state-owned operator Bharat Sanchar Nigam Ltd. (BSNL).

Huawei confirms it has received a notice from BSNL for failing to deliver on a contract for 1.05 million lines of CDMA2000 equipment that it won through Indian partners Himachal Futuristic Communications Ltd. (HFCL) and Semiconductor Complex Ltd. Huawei is awaiting a decision from the government on its application to bid on tenders and in the meantime has to use local partners to participate on its behalf.

According to Indian media reports, BSNL issued advanced purchase orders for the equipment to HFCL and SCL in August for delivery in November but was told they were not receiving the support they needed from Huawei. On October 7, BSNL issued a "show cause" notice giving the vendor 10 days to explain why it shouldn't be excluded from future tenders, which it did, and now the two companies are hashing out the dispute.

"In view of ensuring a successful project for BSNL, we are still in discussions to find a mutually beneficial solution," writes Huawei India spokesperson Fu Jun in an email to Light Reading.

The carrier is considering banning Huawei from participating in any tender -- wireless or fixed -- it issues for a year, or permanently banning the vendor from bidding on CDMA projects in the future. BSNL executives could not be reached for comment as this article was published.

The brouhaha could be particularly harmful to the Chinese vendor, which is already viewed with suspicion in the Indian telecom industry; it caused a stir when it undercut its rivals on price and won the RS1.4 billion ($31.16 million) bid and now faces criticism on its failure to follow through.

Keen to stress Huawei is a "reliable" company that has "a long, successful relationship with BSNL," officials have sought to deflect the blame onto its partners. "Since the beginning of this project, we have worked closely with our local partners to ensure an effective and timely implementation of the project," writes Jun. "Huawei Technologies has established many initiatives, processes, and systems to ensure a successful implementation in meeting the needs of BSNL."

The stakes are especially high, as BSNL has a major GSM tender coming up in December that just got bigger -- the carrier has bumped up the proposed order from 40 million to 60-70 million lines in a deal that could be worth over $4 billion. That would make it the largest ever telecom tender in a market that is seeing explosive growth and that everyone wants in.

Sweden's (Nasdaq: ERICY) said Monday it plans to invest hundreds of million of dollars in India, including boosting its manufacturing facilities to up its position in the bidding stakes. The Indian government recently ruled foreign vendors must have a local manufacturing presence to bid on contracts. (See India Blocks Foreign Telecom Gear.) Other Chinese vendors likely to bid include ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) and Comba Telecom, which opened an office in India yesterday and plans to participate through its OEMs (one of those OEMs is ZTE).

Huawei also has expansion plans in India to the tune of $100 million that it's waiting to get approved. "Huawei is committed to the Indian market and participates and invests to further the development of India's telecom industry," writes Jun.

— Nicole Willing, Reporter, Light Reading

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