BSNL Splits GSM Deal

Nokia Corp. (NYSE: NOK) and Nortel Networks Ltd. (NYSE/Toronto: NT) have secured the monster network expansion deal at Indian GSM (Global System for Mobile communications) carrier Bharat Sanchar Nigam Ltd. (BSNL), estimated to be worth a total of $862 million.

“Final selection of the vendors has been done and advance purchase orders have been placed for 7 million GSM lines with Nortel and 4 million lines with Nokia,” N.K. Mangla, BSNL’s director of marketing, told Reuters (see BSNL Shares the Wealth).

BSNL was unavailable for immediate further comment.

“We have received a letter of intent concerning the northern area,” confirmed Tuula Putkinen, communications manager at Nokia’s networks division. “We are finalizing the details.”

Meanwhile Nortel’s win involves the southern and eastern regions of India, focusing on the buildout, respectively, of 4 million lines and 3 million lines.

"Nortel Networks is very pleased with the receipt of a non binding Advance Purchase Order (APO) from Bharat Sanchar Nigam Ltd (BSNL)," confirms a Nortel statement. "This APO relates to the east and south regions of a proposed national GSM network to be undertaken by BSNL in India. The two parties will now focus on working out details of the project and the entering into of definitive, binding agreements. We are therefore not in a position to elaborate further at this point."

Such a breakdown gives Nortel a dominant share of the contract deal, worth approximately $549 million, whilst Nokia takes home an estimated $313 million.

Both vendors will add to GSM kit already supplied by Swedish rival LM Ericsson (Nasdaq: ERICY) in an earlier deal (see Ericsson Does GSM in India).

French vendor Alcatel SA (NYSE: ALA; Paris: CGEP:PA) is believed to have previously secured a smaller 1 million line contract award for the western region.

The latest network deal is the largest ever in India’s booming wireless industry. Research firm EMC gives BSNL a GSM subscriber base of 6.2 million as of July 2004, behind market leader Bharti Cellular Ltd.'s 8 million. Last month BSNL forecast it would hit 25 million customers by December 2005 (see Nortel Named in Big Indian Deal).

Lehman Brothers expects the Indian region to reach 50 million subscribers by the end of 2004 and 100 million by 2006.

— Justin Springham, Senior Editor, Europe, Unstrung

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