BSNL Floats New Mega GSM Tender

Indian state-run operator Bharat Sanchar Nigam Ltd. (BSNL) has finally issued new tenders for GSM equipment, inviting bids from vendors to supply 93 million lines after the messy demise of its previous plan to increase network capacity by 63 million lines.

Since BSNL been pushing vendors to supply equipment at under $100 per line, the new contracts could be worth around $6 billion.

Back in 2006, BSNL issued a tender for equipment valued at more than $4 billion that was repeatedly delayed and eventually fell apart last year after India's new telecom minister pushed the company to cut the tender in half. BSNL eventually awarded a required 15 million line deal to state-owned vendor ITI Ltd. and a $1 billion deal to Ericsson for 13 million lines, while Nokia Networks declined to sign a $875 million agreement.

For the full saga, see:

According to four new tenders posted on its Website, BSNL is looking to procure 25 million lines for coverage in India's western telecom circles, or service areas, 25 million lines for circles in the north, 25 million for the southern zone, and 18 million for the east. (See A Guide to India's Telecom Operators for a map and explanation of India’s telecom circles.)

Vendors have until July 16 to put in their bids.

The new lines will be rolled out in three phases and contain a 3G component -- 75 million lines will be GSM and the remaining 18 million UMTS -- with the 3G rollout weighted toward the third phase. The Indian government is still mulling its 3G policy and is yet to award spectrum. (See India Plans 3G Auction and India on Edge Over 3G.)

Table 1 shows the breakdown of lines by circle and technology:

Table 1: Breakdown of equipment orders
Circle 2G lines (millions) 3G lines (millions) Total
Maharashtra 8 2 10
Gujarat 6 1.5 7.5
Madhya Pradesh 6 1.5 7.5
West zone total 20 5 25
Punjab 3.45 0.85 4.3
Himachal Pradesh 0.72 0.18 0.9
Haryana 1.6 0.4 2
Jammu & Kashmir 0.96 0.24 1.2
Uttar Pradesh (East) 4.8 1.2 6
Uttar Pradesh (West) 4.16 1.04 5.2
Rajasthan 4.35 1.05 5.4
North zone total 20.04 4.96 25
Andhra Pradesh 5.5 0.62 6.12
Karnataka 4.5 0.91 5.41
Kerala 4 1.44 5.44
Tamil Nadu 5.5 0.62 6.12
Chennai 1 0.91 1.91
South zone total 20.5 4.5 25
Assam 0.08 0.02 0.1
Bihar 3.92 0.98 4.9
Orissa 1.52 0.38 1.9
West Bengal 3.04 0.76 3.8
North East 3.44 0.86 4.3
Kolkata 2.4 0.6 3
East zone total 14.4 3.6 18
Total circles 74.94 18.06 93
Source: BSNL

The tenders have been divided into four parts -- 2G lines, 3G lines, infrastructure, and OSS/BSS systems -- and eligible companies can bid for individual parts or all four of them.

BSNL apparently decided to split out the components when complaints surfaced from the likes of Sun Microsystems Inc. , Juniper Networks Inc. (NYSE: JNPR), and EMC Corp. (NYSE: EMC), which were subcontracted by Ericsson, that they were being edged out in favor of rivals offering cheaper quotes after BSNL cut the size of its contract.

The tender conditions also state that a vendor will not be awarded contracts in more than two of the zones, meaning the largest contract a single company could get would be for 50 million lines.

The documents were circulated to vendors on May 1 and have reportedly gone out to all the usual suspects, including Ericsson AB (Nasdaq: ERIC), Nokia Networks , Motorola Inc. (NYSE: MOT), Nortel Networks Ltd. , Alcatel-Lucent (NYSE: ALU), Huawei Technologies Co. Ltd. , and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763).

According to Indian government policy, 30 percent of the equipment ordered by BSNL and its sister company Mahanagar Telephone Nigam Ltd. (MTNL) has to be supplied by state-owned ITI, which has a supply partnership with Alcatel-Lucent. The Economic Times reports that it's not clear at this stage whether that 30 percent will be included in the 93 million lines or if BSNL will issue a separate order to ITI. BSNL has been trying to get the government to remove the requirement, citing past delays in receiving equipment from ITI that have left it short on capacity.

With the initial tender incomplete, BSNL's network became increasingly congested, and subscriber growth all but stalled as it lost market share to private operators. The carrier recently placed orders with Nortel and Motorola as a follow-on to previous contracts to tide it over before issuing this new request for bids. (See BSNL Goes for More GSM Gear.) The larger size of this round of contracts reflects how the carrier has fallen further behind in its network expansion project.

At the end of March, BSNL had 36.21 million GSM subscribers and 4.58 million CDMA-based fixed-wireless subscribers, putting it fourth behind Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Reliance Communications Ltd. (RCom) , and Vodafone India . (See India Crosses 10M Mobile Adds in March.)

— Nicole Willing, Reporter, Light Reading

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