Destroying BSNL, one more time

Objections to the telco’s 4G tenders are reminiscent of the past. But this time, BSNL cannot afford to lose its chance of survival

State-run telecom company BSNL recently got a new lease of life after the Centre pumped in about 70,000 crore to revive it. It’s not even six months since this relief package was announced, and there is already an attempt to scuttle the dying telecom company’s revival plans.

On March 23, BSNL floated a new tender to procure 4G equipment in a bid to expand its mobile broadband network. The contract, valued at nearly 9,000 crore, included upgradation of 50,000 sites across the country that would position the telecom company to offer high-speed Internet access to its users. This project is crucial for the company, as it is already four years behind private telecom companies including Reliance Jio and Airtel in launching 4G services.

Deployment issue

So far, BSNL has been offering 2G and 3G services, thereby losing out on the opportunity to earn higher revenues from 4G customers. To plug this gap, the Centre decided to allocate 4G spectrum to BSNL this year and the company was quick to float the tender to award a comprehensive contract for planning, engineering, supply, and maintenance of its 4G network.

Just when things were looking to be on track, the tender for purchasing the equipment came under scrutiny from the Ministry of Commerce, after an industry body raised concerns. On April 15, the Telecom Equipment and Services Export Promotion Council (TEPC) sent a letter to various government departments, including the Ministry of Communications and the Prime Minister’s Office, alleging that the tender conditions set by BSNL flouted procurement rules under the ‘Make in India’ policy, and was heavily in favour of multinational companies. TEPC is an industry association representing domestic telecom equipment manufacturers such as Tejas Networks, Sterlite, HFCL, and Vihaan Networks.

In the letter, TEPC said that since public money was being used to revive BSNL, domestic suppliers of network equipment should be encouraged to participate in the tendering process. But they could not participate because, according to them, BSNL has set stiff conditions for bidders — including the requirement of having previous experience of setting up a mobile network for at least 20 million subscribers. It has also raised the national security angle, as if to suggest that equipment supplied by non-Indian entities could expose BSNL’s network to snooping.

BSNL has now been told to rework the tender after the Ministry of Commerce intervened. This means further delays. Meanwhile, Airtel has awarded a $1-billion contract to Finland’s Nokia for supplying 4G network equipment. No one has raised any security concerns on this deal.

It seems that lessons from the past, which ruined BSNL, have not been learned.

Past experience

Cut to 2008, when the Indian cellular market was at the cusp of exponential growth with 6-10 million new mobile users every month. Bharti Airtel was the top operator with 57 million users, followed by Vodafone-Essar at 41 million. BSNL, with 33.7 million users, decided to up the ante and announced an audacious plan to increase its network capacity by 94 million new lines at an investment of $10 billion, making it the world’s largest telecom equipment contract at that time. But then, allegations of irregularities in the tendering process hit the project.

Two years later, in 2010, the entire project was scrapped, dealing a crippling blow to BSNL’s expansion plans. Without adequate capacity to meet the growing demand for mobile phones, BSNL was pushed to the fifth spot after Airtel, Reliance Communications, Vodafone Essar and Idea Cellular.

BSNL’s revenues were nearly 40,00