Raja to renegotiate $4.5 billion order with telecom vendors

Raja to renegotiate $4.5 billion order with telecom vendors
Comment E-mail Print Share
First Published: Sat, Jun 02 2007. 12 02 AM IST

Bargain hunting: Andimuthu Raja.
Bargain hunting: Andimuthu Raja.
Updated: Sat, Jun 02 2007. 12 02 AM IST
Global telecom vendors Ericsson AB and Nokia Siemens Networks will be asked to reduce prices of mobile telephony equipment they have been contracted to supply in the world’s largest such order by state-owned Bharat Sanchar Nigam Ltd, communications and information technology minister Andimuthu Raja said.
Raja said he was looking at Ericsson and Nokia Siemens, which are to supply $4.5-billion (Rs18,450 crore) worth of equipment in three years, to reduce prices by at least 6.5%.
“There are indications that the equipment is being supplied at lower rates to other parties... we think BSNL can negotiate the price further,” Raja said. The tender, awarded in October to Ericsson and Nokia in the 3:2 ratio, was based on a price of $107 per line. “Anything less than $100,” the minister said when quizzed on how much lower BSNL wanted the quote to be.
Bargain hunting: Andimuthu Raja.
The 45.5-million-line tender is the world’s largest single-tender GSM cellular equipment purchase by any company and was won by Sweden’s Ericsson after quoting $107 per line, against the $177 quoted by Nokia. But the terms of the tender mandated that Nokia be offered the option of supplying 40% of the lines at the lowest bid price, along with Ericsson which got the remaining 60%.
A BSNL official said the purchase agreement allows the company, India’s largest telecom firm, the right to negotiate and bring down the prices further. “It is not a controversial process, and we are confident of finishing the negotiations within one week,” A.K. Sinha, BSNL chairman and managing director, said. “The recent deals the suppliers have struck with private operators are cheaper than those quoted in the bids.” Executives of the local units of Ericsson and Nokia Siemens declined comment.
BSNL runs India’s third-largest cellular service branded Cellone and had over 27 million customers in April.
The current tender, crucial to BSNL’s expansion plans and rolling out of its planned ‘third-generation’ networks —or 3G, a high-speed data service—this year, has already been stalled by around six months after Motorola Inc., which was rejected from bidding, had approached the Delhi high court. It withdrew its objections in April saying it considered BSNL a valuable client for the future.
The contract is part of the fifth phase of BSNL’s mobile phone network expansion plan and has an additional 18-million-line supply from government-run ITI Ltd, in partnership with equipment maker Alcatel Lucent. The price at which ITI and Alcatel Lucent supply equipment will also be affected by the minister’s decision. Raja also indicated that the 3G and wireless broadband policy will be announced during the next session of Parliament beginning in July.
Comment E-mail Print Share
First Published: Sat, Jun 02 2007. 12 02 AM IST
More Topics: Corporate News | Sector Spotlight |