BSNL to float $3.5 bn tender

NEW DELHI: State-owned telecom company, BSNL, plans to float a $3.5-billion tender, a third of which will be reserved for public sector telecom equipment company ITI, an executive aware of the development told. The telco wants to procure equipment for 40 million GSM lines. BSNL is yet to decide if it wants to go in for a single contract or split it into two tenders for 20 million GSM lines over a two-year period, this executive added. This contract will provide the company with sufficient capacity till 2013.

"To take care of the long-term expansion requirements, BSNL has planned to expand its mobile network by a capacity of 20 million lines each in 2011-12 and 2012-13 ," the telco said in its status report sent to the telecoms department earlier this month.

This will be in addition to the 5.5 million GSM lines tender the telco floated recently. BSNL had initially banned Chinese firms from bidding for this 5.5-million line contract to expand its mobile network for its north and eastern zones, but changed the rules later to accommodate firms such as Huawei and ZTE after the Centre allowed participation from Chinese companies.

The $500-million contract for 5.5 million lines was the first tender the PSU floated after it cancelled its 93 million lines contract, the world's largest for telecom equipment, earlier this year. Following the junking of the mega equipment contract, which had run into several controversies including court cases and a probe by the Central Vigilance Commission, BSNL had decided to abolish its tender-based equipment procurement process and adopt the 'managed capacity model' followed by private telcos. But BSNL's plans to move to a managed capacity model have found no takers in the government, forcing the company to opt for the tender model again.

Over the last two years, BSNL has not sourced 30% of its equipment from ITI, despite the policies mandating it to do so. Under pressure from MTNL and BSNL, department of telecom too did not enforce this clause as ITI had not met the delivery schedules for the previous contracts. But earlier this month, the union Cabinet approved the continuation of the 'offset policy', under which 30% of all telecom contracts (for hardware and equipment) awarded by BSNL and MTNL should be sourced and manufactured by ITI.