BSNL hangs up on Huawei

Notice to Chinese firm for undelivered CDMA equipment.

Bharat Sanchar Nigam Ltd has issued a showcause notice to Huawei Technologies, asking the Chinese telecom vendor to explain why it should not be banned from having any business dealings with the public sector major. This can affect Huawei's India plans.

The notice is in response to the failure of Huawei and its partners Himachal Futuristic Communications Ltd (HFCL) and state-owned Semiconductor Complex Ltd (SCL) to supply equipment for over 10.5 lakh CDMA lines. This is after the Chinese firm won a bid last year for supplying equipment by quoting the lowest price of Rs 140 crore.

Huawei bas been given 10 days to reply to the notice, failing which "an appropriate decision will be taken by the PSU without further communication".

BSNL executives said the company was examining two options""banning Huawei from participating in any tendering process for one year or permanently banning the firm from bidding for CDMA projects in the future.

"We have received a reply from Huawei but we are yet to finalise the course of action," a BSNL executive told Business Standard today.

Banning Huawei for a year will mean that the Chinese firm will not be eligible to bid for BSNL's upcoming tender for 60 million GSM lines. The government had recently cleared the decks for all companies, including the ones from China, to bid for this project.

Huawei India's Managing Director Leon Chan said, "We are in discussions with BSNL to find a solution." The tender for the CDMA equipment was floated in July 2004 and the delivery was expected to begin from November, 2005, to be completed in five months.

Huawei had tied up separately with HFCL and SCL to bid for the tender.

According to the executives, BSNL had accepted bids from HFCL and SCL based on Huawei's MoU with these two bidders and its letter of authorisation saying that these two companies were representing Huawei in the bid. BSNL then issued advanced purchase orders to HFCL and SCL in August 2005.

Both the firms, however, expressed their inability to accept the order stating that while they were willing to honour the commitment, they were not getting support from Huawei, their technology provider.

"HFCL and SCL have participated in the BSNL tendering process based on the authorisation letters issued by your company (Huawei) and now you have not honoured your commitment. Owing to this, BSNL is not able to issue purchase orders for the much-needed equipment," said the notice, which was issued on October 7.