BSNL to renegotiate GSM bid price with Ericsson
Ericsson may have emerged the lowest bidder in the Bharat Sanchar Nigam (BSNL) tender to add 5.4m GSM lines.
By Joji Thomas Philip & Manoj Gairola, TNN |
NEW DELHI: Ericsson may have emerged the lowest bidder in the Bharat Sanchar Nigam (BSNL) tender to add 5.4m GSM lines. But its bid of $107 per line for installing network and procuring equipment may not be the final price.
This is because BSNL has decided to invoke an order under CVC guidelines that allows a PSU to negotiate price with the lowest bidder. Ericsson has emerged the lowest bidder, followed by Nokia.
“This is not the final price. We will definitely negotiate with the lowest bidder,” a director of BSNL told ET. BSNL officials claim that they would do some hard bargaining to slash the quote to well below $100 per line. If they manage to do so, it would lead to a substantial savings of over a billion dollars. However, it remains to be seen if Ericsson would comply with these demands and lower its quote.
“The PSU, while examining the financial bids, will also compare the rates at which similar equipment was supplied earlier before fixing benchmark rates for key components. Price negotiations will happen on components wherever there is a significant deviation from the benchmark rates,” a top BSNL executive told ET.
BSNL executives said that the maximum price reductions would be leveraged in Phase I and II rates as “the purchase orders here would go down comparatively, since, in many cases, the supplementary components for the 2G networks such as power generators and other elements can be scaled, rather than go in for fresh purchases.”
ADVERTISEMENT
The networks supplied during Phase I and II will be predominantly for 2G networks. “Besides, BSNL already uses the 2G networks supplied by both Ericsson and Nokia — this reduces the integration costs resulting in the further reduction in the prices per line,” the BSNL official added.Sources said that Ericsson has quoted a price of about Rs 7,796 crore for phase I of the project, Rs 7,375 crore for phase II and Rs 7,423 crore for phase III of the project. The total of all the three phases is Rs 22,794 crore.
The tender conditions envisaged that the lowest bidder would get 60% of the total quantity, while the second lowest bidder would get the rest of 40% quantity. There is a quota for ITI that has partnered with Alcatel for this project.
ITI-Alcatel has already got an order of 18m lines.
Therefore, the price negotiated by Ericsson will determine price of total order of 60m lines. This quantity is so big that even a reduction in price by $1 will have an impact to the tune of $60m on BSNL.
In a recent Mahanagar Telephone Nigam (MTNL) tender for procuring GSM equipment of 4m lines, Motorola was the lowest bidder. It had quoted a price of $65 per line.
Ericsson was the second lowest bidder by quoting a price of about $80m per line. It failed to get any orders. Both BSNL and MTNL tenders envisaged 3G component. Motorola had an advantage in the MTNL tender as it has installed MTNL’s existing GSM network in Delhi.
Interestingly, MTNL was expecting that the vendors will quote lower price in BSNL tender because of higher quantity. Therefore, it had a clause in the tender envisaging that the lowest bidder in MTNL’s tender will have to match the price quoted by the lowest bidder in BSNL, in case the price in BSNL tender is lower.
In BSNL’s tender Nokia emerged as the second lowest bidder. It has quoted a much higher price than Ericsson. However, as per tender conditions, the second bidder would be required to match the price quoted by the lowest bidder.
ADVERTISEMENT
Siemens has emerged as the highest bidder and it will not get any order from BSNL. However, Nokia and Siemens have announced merger of their mobile and communication infrastructure divisions. The merger is expected to be approved by January.
Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
