The cancelation by Indian carrier Bharat Sanchar Nigam Limited (BSNL) of a huge network tender to Huawei remains a mystery days after the event.
However, the decision is not going to hurt the Chinese vendors other equipment contracts in the country, analysts say.
State-owned BSNL had awarded the contract to Huawei last month, but the Indian company told the state news agency Press Trust of India that the deal had been canceled because of Huawei “imposing conditions” on the order.
“There was no scope for accepting conditions as the order was placed after detailed negotiations and as a government owned firm we (BSNL) do not accept conditions,” the official was quoted as saying.
He did not elaborate on the conditions, and neither company is saying anything on the record.
In New Delhi, emails and calls to the BSNL Chairman’s office on the issue went unreturned. It was a similar story at Huawei’s headquarters. “Huawei is unable to comment on this matter due to a fluid local market situation,” said Thong Poh Wah, regional PR director, Asia Pacific, Huawei.
While the cancellation will hurt Huawei’s revenue growth in India this year, it won’t affect the company’s business prospects with other telecom operators in India, says Amit Gupta, principal analyst for Emerging Markets at Ovum.
“Unless the government bans Huawei in India, private operators will continue giving it contracts. As long as it makes business sense and the product is good, they are fine.” This summer, Indian security agencies launched a probe into Huawei’s expansion plans in the country because of the company’s reported links to the Chinese military.
India is a key market for Huawei, which garners about 75% of revenues from overseas markets. In 2008, its India revenues were $1.3 billion (€882m) and the company was targeting doubling that this year.
With the elimination of Huawei, Ericsson, Nokia Siemens, ZTE and Alcatel Lucent are now vying for the contract. BSNL is already in talks with Ericsson for a GSM network expansion contract for North and East India. The Huawei contract was for capacity in south India.
But “re-tendering will entail a lot of internal resistance,” says Gupta. BSNL has plenty of challenges to pushing through large contracts like the one awarded to Huawei.
In the past, it has been accused of not being transparent on awarding deals. And for putting in place a new order, there is bound to be some “government intervention, resistance from unions,” he says.
The delay in expansion is likely to further hit BSNL’s revenue prospects. The company is already struggling against an onslaught of competition, especially from new private operators that have set off price wars in the Indian market. Despite being given 3G networks early this year, before any private sector operators, BSNL has been unable to attract a significant customer base.
Data from the Telecom Regulatory Authority for the April-June quarter shows that BSNL’s wireless subscriber additions were among the lowest—a growth of 29.6% year-on-year compared to 47.6% for market leader Bharti Airtel, 56.8% for Reliance Communications and 55.9% for Vodafone.