Siemens, Fujitsu Frontrunners For Basic Teleservices Contract
Siemens of Germany and Japanese electronics major Fujitsu lead the list of telecom equipment vendors vying for the network contract of Basic Teleservices, the basic telecom services consortium which holds the letter of intent for Tamil Nadu. Other equipment suppliers in the race are Nippon Electric Corporation (NEC), another Japanese electronics giant, and Ericsson of Sweden.
Although the Calcutta-based R P Goenka group and its Japanese partner, Nippon Telephone and Telegraph (NTT) the principal shareholders in Basic Teleservices are yet to finalise the contract, sources say they are likely to plump for the Siemens-Fujitsu combination.
It is also likely that Fujitsu will pick up a stake in the company if it wins the contract. The stake will be a sweetener in the deal, sources said. Under the present shareholding arrangement, RPG controls 51 per cent in the company, NTT 39 per cent and Itochu 10 per cent. Itochu has been negotiating with RPG and NTT to hike its stake in the venture.
The order size is around $500 million (Rs 1,800 crore) for the first five years of the project and is expected to be entirely funded through suppliers credit which will be arranged by equipment vendors from banks in their home countries. The suppliers credit agreement is being negotiated between Basic Teleservices and the vendors, sources said.
The cost per line of the equipment has not been worked out yet. Basic telecom companies have received quotes from equipment vendors ranging from $1,600 to $2,100 per line. This includes the cost of the entire network: telephone exchanges, a transmission backbone and the local loop connecting subscribers. The service providers hope to reduce this price to about $1,000 per line.
The Basic Teleservices equipment supply contract is expected to be concluded by the end of June. The negotiations are at a business analysis stage now. The company has a team of technical specialists from NTT in the country to fine-tune the agreements and other details, an executive with a MNC telecom vendor said.
The company had challenged in the Delhi High Court a department of telecommunications decision seeking to encash its bank guarantees late last year. It is expected to withdraw the case after assurances from the department that all remaining issues will be resolved.
The Tamil Nadu project is expected to soak an equity of Rs 1,680 crore (project cost Rs 4,200 crore, debt-equity of 60:40). Of this, the RPG groups contribution will be some Rs 857 crore, which is funded though RPG Telephone Ltd, the groups holding company for basic services.