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Tender Trouble - Motorola contests BSNL bidding process in court

October 15, 2006
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US-based Motorola has taken staterun BSNL to court over its disqualification from the bidding process for the supply of equipment for BSNL's 45.5 million GSM line contract, one of the world's biggest telecom expansion projects, involving an estimated cost of over Rs 200 billion. Motorola and ZTE were put out of the race on technical grounds.

Motorola learnt of this informally when it was not invited to participate in the final bid. Consequently, it contested the decision, stating that it had at no time been told that its bid was being dropped on technical grounds. This was despite the fact that the company was in regular discussions with BSNL, providing compliance undertakings and answering technical queries whenever required by the company.

The Motorola spokesperson stated that the company is "both surprised and disappointed". Officials at Motorola say that they are seeking further clarification and transparency in the tender process. "We are not seeking any special consideration, but rather equal consideration," said a senior official. ZTE has also expressed its intention of challenging BSNL's decision to disqualify it.

As of now, the court has declined to stay the tender process but has asked BSNL to respond by end-October.

BSNL is not commenting on the matter for now as it is sub judice. However, A.K. Sinha, CMD of BSNL is quite clear that the company has been completely open and transparent in the tendering process, where five companies –­ Ericsson, Nokia, ZTE, Siemens and Motorola –­ bid for the tender. However, a close industry watcher points out that Motorola may also be smarting from the fact that Nokia and Siemens have merged their network businesses into Nokia-Siemens Networks, a company that will come into being from January 1, 2007. This effectively means that only two bidders –­ Ericsson and Nokia-Siemens Networks –­ are being considered for the BSNL bid.

According to Sinha, there was no malice involved towards Motorola or ZTE as BSNL has been, and is, working with the two vendors on other telecom projects. Even currently, Motorola has a contract with BSNL for GSM equipment worth over $300 million while ZTE is carrying out its Rs 6 billion contract for laying CDMA lines. The two companies were disqualified on purely technical grounds.

Explaining the matter further, S.D. Saxena, financial director of BSNL says, "One of the reasons why the tender evaluation committee perhaps did not find them fit, was that the tender conditions required that the prospective vendor had experience in putting up 20 million lines, which Motorola did not have.

Meanwhile, Sinha says, "We are currently in the last phase of finalising our mega tender for which we have selected Ericsson and Nokia as partners for the expansion plans."

After Motorola, Swedish telecom major Ericsson has emerged as the lowest bidder. Finnish giant Nokia's bid was the second lowest.

The design of the BSNL tender is such that the lowest bidder gets 60 per cent of the contract, while the second lowest, that is Nokia, will get the balance at the price offered by the lowest bidder. Another 18 million lines are reserved for state-owned ITI Limited, which has tied up with French company Alcatel to manufacture mobile equipment. The ITI-Alcatel consortium will also have to match the lowest bid. According to reports, it appears that Ericsson had bid $107 a line. This works out to $4.69 billion for the 45.5 million lines available to private players. Nokia's bid was $177 a line.

While the final award of the contract would take a month's time, BSNL is somewhat hesitant to go ahead. This is because, even though it can process the tender, it runs the risk of the court setting aside the award of contracts.

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