Chinese telecom equipment provider will have to look for new contracts as it is likely to lose up to 10 per cent of its projected business in India with BSNL cancelling the tender for 93 million GSM lines.
Huawei was shortlisted for the South region for providing 23 million lines and the contract, over a period of three years, was estimated to be worth around $750 million (over Rs 3,400 crore).
Huawei and Ericsson were the only two shortlisted companies for the tender.
Huawei executives said 15-20 per cent of their business came from BSNL. They added the development would hit the company as it was expecting to clock revenues of $3 billion (Rs 13,650 crore) from India operations this year.
BSNL would have accounted for revenues of $250 million (over Rs 1,137 crore) this year. Company executives said they would now look at 3G equipment contracts that would come up after the 3G spectrum auctions in April.
The board of BSNL decided to scrap the controversial tender, which was one of the recommendations of the Sam Pitroda committee to strengthen the company. However, a final decision would be taken by the communications ministry.
Swedish telecom equipment maker Ericsson is unlikely to be affected by the cancellation of the order as it is less dependent on the PSU.
Ericsson was selected by BSNL to provide lines in North and East zones.
The Indian mobile industry has been adding 12-15 million users every month. The growth in the industry would not stop and business would come from other service providers, sources close to Ericsson said.
However, the move to scrap the tender will impact the growth of BSNL, which from being the second-largest mobile service provider in 2006 has fallen to the fifth position after Bharti Airtel, Reliance Communications, Vodafone Essar and Idea Cellular. It has steadily lost ground to private sector rivals, with its share of the market, once well above 20 per cent, falling to 12 per cent. It needs equipment to expand.
The BSNL tender was referred to the Pitroda committee after a number of controversies - ranging from the home ministry's objections to Chinese equipment firms to legal suits by disqualified vendors. The committee has HDFC Chairman Deepak Parekh and Telecom Secretary PJ Thomas as members.
The problems started just after BSNL disqualified three of the five bidders on technical grounds. Ericsson and Huawei were shortlisted, while Nokia Siemens, Alcatel Lucent and ZTE were disqualified. Nokia Siemens challenged its disqualification in the Court.
Further, security agencies said BSNL could not buy telecom equipment from any Chinese vendor, including Huawei. Subsequently, BSNL started negotiations with Ericsson.
However, the Department of Telecommunications said BSNL might not get the best price as there was no competitive bidding. After this, the Central Vigilance Commission was asked to look into the irregularities in the tender. It also suggested that the tender be scrapped.
