Ericsson refuses price change in BSNL tender

BSNL’s expansion plans look set to be delayed further as Swedish network equipment major is learnt to have told the public sector telecom giant that it will not renegotiate the price for the tender for 45.5 million GSM lines.

With Ericsson refusing to budge, BSNL has been forced into a tight corner as the telecom minister A Raja wants the PSU to negotiate a lower price for the $4.8-billion contract awarded to Ericsson, the lowest bidder at a BSNL tender at $107 per line. “If BSNL manages to get it at less than $100 per line, the country will save Rs 2,000 crore,” Mr Raja had told the media recently.

According to sources, in a meet with BSNL and Department of Telecom (DoT) officials earlier this week to discus the issues, Ericsson made it clear that any reduction from its bid amount would not be possible.

Ericsson had emerged as the lowest bidder for the BSNL tender for 45.5 million lines, followed by Nokia. As per the terms of the tender, Nokia will have to match Ericsson’s price and the contract will be split between Ericsson and Nokia at 60:40 ratio.

At the current rate of $107 per line, the total value of the contract is $4.87 billion, where Ericsson’s part of the tender is at $2.92 billion, while the value of the Nokia contract is pegged at $1.95 billion.

According to sources, Ericsson maintains that it cannot reduce prices any further, especially considering that the second and third lowest bidders had quoted $160 and $360, respectively, for each connection.

With regard to Mr Raja’s argument that its price is higher than what it offers private operators, Ericsson maintains that the business models cannot be compared. Besides, the company has also said that the BSNL tender involved both 2G and 3G networks unlike its deals with other private operators, sources added.

Any further delay in the tender will have a major impact on the PSU’s expansion plans as it has already run of network capacity in all key circles. This has also resulted in Hutchison Essar (HEL) displacing BSNL to become the second largest GSM player in India. Last month, HEL surpassed BSNL after it recorded a 5.4% growth in its subscriber base during, with the addition of over 1.5 million subscribers during this period, when compared to 0.24 million for the PSU.

BSNL has not undertaken any major expansion contract since October 2005. This has witnessed even regional players like Idea Cellular which has operations in just 11 circles overtaking the PSU in terms of subscriber addition over the last couple of months