BSNL Puts Mega Tender Plan on Hold?

BSNL puts mega tender plan on hold
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NEW DELHI: In a major setback to the expansion plans of state-owned BSNL, the telco’s board on Wednesday decided to put its tender for 93 million lines ‘on hold’ until ‘all allegations of irregularities are investigated,’ a top executive with the PSU told ET.

The tender for 93 million lines, the world’s largest-ever equipment order, has been delayed for over a year now and BSNL executives maintain that ‘vested interests’ are at work behind the delays to ensure that the PSU losses its prominence in the country’s mobile space. Controversies around its tenders have resulted in BSNL not being able to place any significant orders for equipment over the last three years during which the mobile market in India recorded the highest growth globally. This has also resulted in BSNL, which was challenging Bharti Airtel for the top spot in the mobile space in 2006 now being pushed to the fifth spot after Airtel, Reliance Communications, Vodafone Essar and Idea Cellular. Besides, Tata Teleservices is also poised to overtake BSNL in mobile customers within the next couple of months.

“The board, during its meet today decided to put the tender on hold. We are not cancelling the tender of halving it as suggested by one of the government representative on our board. All court cases on the tender have gone in our favour and even an ‘integrity panel’ set up with the permission of the Central Vigilance Commission (CVC) has cleared us of any wrongdoing in the past regarding this tender. We will therefore wait for the results of the latest probe by CVC before placing orders with successful bidders — Ericsson and Huawei,” the top BSNL executive added.

The BSNL move comes as the CVC has launched a fresh probe into the BSNL tender as the anti-corruption body’s guidelines forbid post-tender negotiations with successful bidders. Sweden’s Ericsson had emerged as the lowest bidder in the North and South East zones while China’s Huawei was selected for the South and West Zones. The DoT too had earlier asked BSNL not to renegotiate the price with lowest bidder Ericsson since the move would violate CVC guidelines.

However, following the board meet on Wednesday, BSNL executives pointed out that it had entered into post-tender negotiations with Ericsson since this could result in a 20-25% reduction in the price.

“We were seeking a discount from Ericsson and have been in talks with them on this for over a month. A 20% reduction in the tender price can save the company upto $1 billion. In the past too, post-tender negotiations were part of all deals we had signed and this has helped us bring down costs significantly,” explained an executive on the BSNL board.

This is the third instance of this tender being delayed. Earlier this year, Nokia Siemens Networks (NSN) had gone to courts challenging BSNL’s decision to disqualify the company’s bid for 93 million GSM lines on technical grounds. Responding to NSN’s petition, the Andhra Pradesh High Court had first ordered status quo on the tendering process, but later ruled that BSNL was justified in disqualifying NSN because the latter did not meet technical requirements. NSN also approached the CVC seeking a probe into the issue. In August 2009, an ‘integrity panel’ set up with the CVC’s permission had endorsed BSNL’s decision to disqualify NSN on technical grounds. This also led to the umbrella body representing all employee unions of BSNL asking telcos’ management to act against NSN for delaying BSNL’s expansion plans.

Following this, the tender was delayed again when security agencies and the home ministry opposed BSNL’s plan to award the contract to China’s Huawei on security grounds. After long negotiations, BSNL then got the approval of security agencies to award telecom equipment contract to Huawei, but only in the south as the region does not share any sensitive borders.

These delays has had huge impact on BSNL’s financials — for the fiscal year to end-March 2009, its profit was a measly Rs 575 crore on total revenues of Rs 35,811.92 crore, and even profit was possible only because interest income from its cash reserves was about Rs 3,900 crore. Profits had nose-dived 81% and revenues fell 6% when compared to the year-ago period. A measure of the depths to which BSNL has sunk is the fact that its revenues were nearly Rs 40,000 crore in the year to March 2007. Bharti’s was at Rs 37,352 crore at the end of March this year. Incidentally, in 2007, Bharti’s revenues were only Rs 18,420 crore while profits were at Rs 4,062 crore.


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