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BSNL Shuns Huawei

Indian state-run operator Bharat Sanchar Nigam Ltd. (BSNL) has yet to make a final decision on how long to cut off Huawei Technologies Co. Ltd. after it defaulted on a contract, but it appears the Chinese equipment vendor is already out in the cold when it comes to future business.

BSNL issued a notice to the vendor in October, asking for an explanation as to why it shouldn't be blacklisted from future contracts after its local partners failed to deliver 1.05 million lines of CDMA2000 equipment. (See BSNL Threatens to Ban Huawei.)

BSNL has been agonising over a decision for weeks. According to Huawei spokeswoman Cassandra Cheong, "Based on our understanding, BSNL has yet to make a decision and we are still in discussions to continue our long, successful relationship together."

But in the meantime BSNL has cancelled the CDMA deal and is due to put it back out for tender, excluding Huawei and its partners of course.

The episode has delayed its rollout of much-needed phone lines in rural India -- there's a waiting list of around 1.35 million -- and it reportedly asked ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) to take on the contract to help out. ZTE submitted the second lowest bid after Huawei in the original tender, but the rival Chinese vendor turned it down, saying it couldn't match Huawei's price.

With Huawei out of favor, China's other equipment vendors -- also known for their low prices -- are picking up extra business from the rapidly-expanding carrier.

India's Business Standard reports that Huawei has lost out to ZTE on a 50:50 joint venture with BSNL said to be announced soon. Both vendors had been shortlisted for the tender, but the carrier ultimately chose ZTE for the project that will include the manufacture of one million CDMA mobile handsets and one million fixed wireless terminals.

Neither BSNL nor ZTE had responded to requests for comment as this article was published.

The news follows an announcement from UTStarcom Inc. (Nasdaq: UTSI) that it has been awarded an expansion contract from BSNL for 90,000 DSL lines, IP DSLAMs being another Huawei specialty. (See UTStarcom, BSNL Team and Huawei Deepens DSLAM Penetration.)

Huawei's taking it bravely and is optimistic it'll pick up more business, having worked with BSNL since 1999. "We are unable to comment on other companies' contract[s], but Huawei remains committed to the Indian market," Cheong writes in an email to Light Reading. "We believe Huawei will be able to positively contribute to India's development by generating additional opportunities for the India telecom market."

The ongoing quarrel with partly-state-owned BSNL aggravates an already delicate situation for Huawei, which is viewed with suspicion by the Indian government and has had its expansion plans delayed repeatedly. (See India Blocks Foreign Telecom Gear.)

As for the proposed ban, the Indian media is reporting that while senior officials at BSNL want to cut Huawei off completely, there's a consensus at the board level that Huawei should be blacklisted from all future CDMA tenders, but still be allowed to bid on its upcoming mega GSM tender for 60-70 million lines, worth around $4.5 billion.

The delay in making the decision is mostly about money; BSNL knows that Huawei is likely to quote much lower prices for contracts than its North American and European competitors and even its Chinese counterparts. And with India's telecom market growing rapidly, BSNL needs to build out a large amount of infrastructure to meet demand and wants to do it as cheaply as possible.

— Nicole Willing, Reporter, Light Reading

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stawdema 12/5/2012 | 2:51:17 AM
re: BSNL Shuns Huawei BSNL wants to pay less and still get the best.
Isn't there a reason why Huawei is able to quote
such low bids :)
Nicole Willing 12/5/2012 | 2:51:17 AM
re: BSNL Shuns Huawei What do you think - should BSNL blacklist Huawei? Slap it with a fine? Kiss and make up? Or...what?
materialgirl 12/5/2012 | 2:51:16 AM
re: BSNL Shuns Huawei What BSNL does depends on their motivation. If it is an indifferent management team looking for kickbacks, then they should go to the highest bidder. If they are actually interested in getting phone service to millions of people, which does not seem to be the case, they should avoid this ship of fools with a ten foot pole.
voipexpat 12/5/2012 | 2:51:15 AM
re: BSNL Shuns Huawei Keep Huawei, if not expand their field of use. Their performance is fine, this is not the issue.

>Expat
ironccie 12/5/2012 | 2:51:11 AM
re: BSNL Shuns Huawei >Isn't there a reason why Huawei is able to quote
>such low bids :)

Lack of respect for human free will and dignity by a government that lets workers be slave driven by the promise of equality but the delivery of a tigher class system than perhaps our beloved India.

IronCCIE
cyber_techy 12/5/2012 | 2:51:11 AM
re: BSNL Shuns Huawei Now that things are getting better (or atleast there is a silver lining), bloodsucking customers like BSNL should be blacklisted by vendors.
alchemy 12/5/2012 | 2:51:10 AM
re: BSNL Shuns Huawei BSNL issued a notice to the vendor in October, asking for an explanation as to why it shouldn't be blacklisted from future contracts after its local partners failed to deliver 1.05 million lines of CDMA2000 equipment. (See BSNL Threatens to Ban Huawei.)

So what happened that Huawei failed to deliver?

Did the US vendor from whom Huawei was stealing software outsource engineering to India? ;)
brahmos 12/5/2012 | 2:51:09 AM
re: BSNL Shuns Huawei why ? there is no way in hell anyone peddling cellular eqpt can afford to ignore the large indian carriers. find me another country other than china with sustained 2-3 million customer adds per month in a greenfield market with lucrative future upgrades to come. and
the teledensity is still only 11%. another 300mil
of unserved people is there to rope in. mobile
subscriber count has crossed 80 mil.

Mobility touches 120 mn
PRESS TRUST OF INDIA

NEW DELHI, DECEMBER 10: The number of telecom subscribers (fixed and mobile) in the country touched 120 million in November 2005 with more than 3.5 million additions in mobiles alone.

The teledensity at the end of November was 11 per cent as compared to 10.66 per cent in October, telecom regulator TRAI said in a statement.

While a total of 3.24 million subscribers (fixed and mobile) were added in October, 2005, the figure in November was a record addition of 3.8 million.

During the first 8 months of year 2005-2006, around 21.50 million people joined the telecom revolution.

In the mobile segment, 3.51 million subscribers have been added during November 2005 as compared to 2.90 million in October.

The number comprises 2.33 million GSM subscribers and 1.18 million CDMA subscribers as against 2.11 million GSM and 0.79 million CDMA last month, the statement said.
optiplayer 12/5/2012 | 2:51:07 AM
re: BSNL Shuns Huawei Two recent data points offer an explanation as to why vendors might not want to do business with BSNL.

1. Nortel is realizing gross margin of about -30% in its GSM deal with BSNL. Granted, no one forced them to sign the contract but if this is what it takes to win business in India then it is likely not worth it (I don't think NT will make it up in volume!!).

2. Huawei's decision not to honor the contract. To me this implies that Huawei would lose big on the deal and chose to default instead of honor it... very telling.

There is no doubt that BSNL has taken advantage of a buyers market in telecom gear (it only makes sense, particularly given that their expected ARPU is likely far lower than providers in more developed markets) but that could be changing and they may have to pay higher prices as global demand for gear picks up.
trzwuip 12/5/2012 | 2:51:07 AM
re: BSNL Shuns Huawei Brahmos: It's not about throwing water on the India telecom story, but dealing with Government owned corrupt entities like BSNL. I ideally the Government should totally get out of the metros (class A and B cities in India) and just focus on rural connectivity.
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