Vendors duck US$1bn Indian contract

While business is tough in the cellular infrastructure business, to turn away a deal said to be worth US$1 billion does scream for deep discounts being demanded by the Indian mobile phone operator Bharat Sanchar Nigam (BSN). However, Ericsson and Nokia Siemens Networks (NSN) have both politely declined the opportunity to bid for the business which will be out for tender next month.

While Ericsson has already secured 60 percent of BSN's order for about 23 million GSM lines, BSN stated that it would award the remaining 40 percent to the second lowest bidder--NSN--which then refused to bid. Ericsson has now also said it would not be offering a response, instead stating it wanted to focus on ensuring high quality for existing customers--a decision, according to the company, not related to the BSN offer terms.

However, the reason most analysts are providing for the refusal from both companies is the low margins associated with the BSN deal. Ericsson has come under increasing pressure because of falling margins due to the company gaining a greater share of its business from new networks, which are less profitable, and fewer than expected orders for high-margin upgrades and expansions.

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