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BSNL puts off banning Huawei for defaulting on a contract but turns to rival Chinese vendors
December 9, 2005
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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