For Bharat Sanchar Nigam Limited BSNL), contracts and controversy seem to go hand in hand. The latest to become a subject of debate is its contract for 93 million GSM lines, which was awarded in May 2009. While all key telecom equipment makers had queued up for the single largest telecom tender in the world, Ericsson and Huawei were awarded the contract. Ericsson received the order for 25 million lines for the north zone and 18 million for the east zone, and Huawei got the order for 25 million lines for the south zone.
To begin with, a controversy arose over the selection of Chinese vendor Huawei which was perceived as a possible threat to the country’s security. Both the home and defence ministries want BSNL to ensure that all security audit processes of networks are in place for protection against spyware, trojans, black boxes, trapdoors and malwares, before going ahead with the contract.
Earlier, in a communication to BSNL, the Department of Telecommunications (DoT) had stated: “In view of the pronounced security concerns with respect to Chinese vendors, procurement of resources from these vendors, particularly in sensitive regions, will not be in the interest of national security.” “Sensitive regions” refers to states that have international borders with China, Bangladesh, Myanmar and Pakistan.
DoT added further riders. BSNL would need to furnish a self-certificate for carrying out the security audit. It would also have to manage its network and not outsource it to any other vendor or third party when it takes over network management within two years.
Moreover, according to DoT, all BSNL networks would have to be free of remote access capability. “BSNL will need to have a DoT-approved network and disaster recovery management plan and capability. This plan or capability should be submitted to the licensor for approval,” stated DoT.
Considering the apprehensions over contracting Huawei, BSNL is looking for alternatives even as it continues price talks with the China-based operator. BSNL has asked the French-Indian combine of Alcatel-Lucent and ITI to stand by as a back-up. If awarded the contract, AlcatelLucent and ITI would have to match the prices offered by Huawei and manufacture a significant portion of the 25 million lines.
Meanwhile, vendors who have been left out of the race have alleged that BSNL has not been fair and transparent in awarding the contracts. Nokia Siemens Networks (NSN), whose bid was dismissed by BSNL on technical grounds, approached the Delhi High Court seeking a stay on BSNL’s Rs 300 billion network contracts to Ericsson and Huawei. Following the rejection of its petition, NSN has now challenged its dismissal from the award process with the Central Vigilance Commission and wants a probe into its disqualification.
NSN, which is confident that it had met all the technical requirements, argues that it should be told about which clauses it had failed to satisfy. BSNL’s tender has the technical conditions listed in the form of clauses and sub-clauses, with a unique clause number for each condition. According to NSN, “All BSNL has to do is provide the clause number for the condition which is not met by the disqualified vendor. This will put to rest all allegations over the selection process.”
The credibility of BSNL’s selection process is being questioned because industry players feel that the operator might have bent some conditions in the tender to favour certain vendors. The earlier tender for 45.5 million GSM lines (which itself was a scaled-down version of the initial tender for about 90 million lines), for instance, had a condition that only vendors with a manufacturing base in India could participate. This condition was eliminated and there is speculation that it could have been done to make Huawei eligible for bidding.
Further, the general perception was that as most of the vendors who participated in the bid are major global telecom players, they would meet the technical specifications. Thus, the only differentiator could be the pricing of the bids. However, with only two vendors meeting the technical specifications, pricing seems to have become largely irrelevant.
BSNL officials, meanwhile, say that NSN’s allegations are baseless, especially considering that the company had refused to supply 9.63 million GSM lines in BSNL’s earlier tender despite being given the contract. According to BSNL, NSN’s failure to accept the order seriously impacted its network expansion plans. Also, the officials say that network vendors cannot dictate the terms of the tender.
For BSNL, it is important that this controversy is laid to rest at the earliest, especially since it could have implications for its awarding the contract for the west zone. Moreover, the company needs to rapidly move ahead with its expansion plans. It is already facing a capacity crunch across the country and any further delay in awarding the contracts will prevent it from taking on new customers. This would result in the PSU falling way behind the private operators.
