BSNL's Rs3,600-crore deal with Ericsson may be curtailed

State-owned telecom operator Bharatiya Sanchar Nigam Ltd may have to pull back its massive Rs3,600 crore expansion plan in the GSM segment, as one of its government-appointed directors has raised questions about the process of evaluation of the tender granted to equipment-maker Ericsson.

BSNL was to acquire equipment from Ericsson for an additional 93 million GSM lines in what was slated as the world's largest telecom tender. The tender was cleared early this year, but since then two new government nominees - J S Deepak, joint secretary in the Department of Telecommunications and P K Mittal, another DoT official, have joined the board.

Ericsson had emerged as the lowest bidder for the tender; and it further lowered its price substantially after negotiations with BSNL. But Deepak in particular has reportedly raised objections, saying the tender was against Central Vigilance Commission (CVC) guidelines.

In a dissenting note to BSNL chairman and managing director Kuldeep Goyal, he said: "It was a single bid throughout the country ... and BSNL has not done a comparative analysis on the basis of total cost to the company." His word could carry weight, as the government owns BSNL and DoT is its administrator.

Deepak presented the dissenting note to Goyal at the company's board meeting on 21 December. In it, he argued that the decision to procure equipment for 93 million lines was taken in April 2008 assuming that BSNL's market share would stabilise at more than 15 per cent in mobile services.

"However, it appears that BSNL's market share in mobile services, which has today come down to less than 13 per cent from 18 per cent a few years back, may ultimately stabilise at between 6 per cent and 8 per cent with increased competition in a total market of about 1 billion mobile phones," the note said.