Court Delays Cost BSNL Millions

A court-ordered delay on Bharat Sanchar Nigam Ltd. (BSNL) 's $6 billion network expansion, prompted by Motorola Inc. (NYSE: MOT), is likely to cost the Indian incumbent millions of dollars in revenues next year.

With India's major operators each adding around one million subscribers every month, BSNL -- which has 23 million mobile customers -- is set to max out its full network capacity of 24 million lines in January. At that point, all potential new customers will be up for grabs by the competition.

After multiple delays, the operator had been preparing to award contracts to Ericsson AB (Nasdaq: ERIC), Nokia Corp. (NYSE: NOK), and state-run ITI Ltd. in partnership with Alcatel-Lucent (NYSE: ALU) to add capacity for 60 million new subscribers to its GSM network at a pace of 20 million per year. (See Ericsson, Nokia Bid Low for BSNL.)

But while the New Delhi High Court considers Motorola's complaint that it was unfairly disqualified from the evaluation process, BSNL is barred from awarding the contracts. (See Moto Stalls BSNL's Wireless Tender.)

The Press Trust of India news agency reports today that the court has extended the hold for the third time, until a final hearing on January 15.

The motion puts BSNL's network expansion almost a year off schedule -- the carrier has been negotiating details of the bidding and evaluation process since the beginning of this year. (See Mega BSNL Contract Looms.) Even when it does finally award the contracts, it will be months before the equipment is up and running in the network.

Its heavily congested network has meant BSNL has lost market share to private operators like Bharti Airtel Ltd. (Mumbai: BHARTIARTL) and Reliance Communications Ltd. (RCom) , which had more capacity available to accommodate the country’s rapid telecom growth this year. According to the Cellular Operators Association of India , BSNL held a 22.8 percent share of the GSM market at the end of November, while Bharti had zoomed ahead by 5.77 percent in a month to 30 percent, with more than 30 million subscribers.

— Nicole Willing, Reporter, Light Reading

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