India's Reliance Preparing Monster Sized GSM Tender

Published on: 14th January 2008

India's Reliance Communications (RCom) is understood to have issued a tender for a GSM contract requiring the supply of between 80-100 million GSM lines. The company was recently granted the necessary GSM spectrum to expand its smaller GSM operations into 14 new circles.

Based on a recent Ericsson tender price in India, the RCom contract could be worth as much as US$8 billion.

The contract is for three years and the winner is expected to be announced within a few weeks. A meeting of potential suppliers has been called at the end of this week to choose the vendors.

This contract is some four times larger than India's previous largest single GSM contract, which was the highly troubled BSNL deal. That was supposed to be for 44 million lines, but ended up being just 22.75 million GSM lines. Even that proved problematic, with Ericsson taking 60% of the contract for US$1.3 billion - and Nokia Siemens declining to take up its 40% allocation due to problems with the tender price, which was US$90 per line.

"The Chinese might offer you lines at $50 (Rs 1,950) per line but they have no back-up support or experience in India. European companies have the experience and installations in India and for that you need to pay a premium," an unnamed executive who is negotiating with RCom told the local Business Standard newspaper.

It is also worth noting that both ZTE and Huawei were originally disqualified from the BSNL contract as the bidders had to have local manufacturing facilities. The lure of large contracts with RCom and potentially later with BSNL may encourage them to set up the required local factories.

 

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