BSNL: Price of Delay

Three hundred and thirty days have passed since the cellular tender was
issued by BSNL for 40 lakh lines to be installed in 1,021 cities. It seems the
advance purchase order (APO) to the participating vendors was issued more than
one-and-a-half months ago but the purchase order (PO) is yet to be issued.

The reason for the delay, according to BSNL sources, is that authorities have
smelled a rat in the prices quoted by vendors. It is being said that the
quotations, which vary only marginally–from Rs 5,970 to Rs 6,052 per line–hint
at a cartel formation. This has also led to quotations being on the higher side
and so BSNL is renegotiating with vendors to get a better price deal, says
sources.

Sources say that the whole matter is now pending with the telecom minister,
who has put a hold on the release of PO and is looking over the entire process
once again. The PO was to be issued to Ericsson, Motorola and Lucent.

According to BSNL  advisors, the earlier the BSNL deployed its cellular
services the better it would be for the company. But now the whole process will
go beyond June or even July 2002 and that too if the purchase order is issued in
December. And the way things are moving at Sanchar Bhavan, this seems unlikely.
As per the terms, vendors were to get a timeframe of eight months once the PO
was issued. Thirty percent of the work was to be completed in six months time,
another 60 percent in the next month, and the remaining 10 percent by the end of
the eight-month period.

The delay in the launch of cellular services by BSNL will only help private
players in consolidating their positions. One might even see an early launch by
a fourth cellular service provider like Bharti, Escotel, Birla AT&T,
Reliance and Barakhamba in order to reap benefits before BSNL launches its
cellular service in the country.

The delay is going to be detrimental for BSNL in a two-pronged manner. While
their alternate resource of revenue generation will get blocked for more time,
the launch of basic and domestic long-distance services by private players will
start eating into their existing revenues. Since BSNL also has to sustain a huge
workforce of around 3.5 lakh employees it is all the more important for it to
start the cellular services at the earliest. By doing so, BSNL can reap the
advantage of being the monopoly player in certain circles and being the second
player in some other, to the fullest. But the delay can cause BSNL to lose on
that front too as the fourth operator may be better prepared with its service
offerings.

Consumers, as always, will be losers due to the delay. One may recall that
the MTNL cellular launch was also delayed due to other reasons, but the day MTNL
launched its services one witnessed a significant dip in the monthly rentals and
airtime tariffs of private operators in Delhi and Mumbai, be it Bharti Cellular,
Sterling Cellular, Hutchison, and BPL Mobile.

The delay in the launch of cellular services by BSNL, once again, will allow
other service providers to maintain their rentals and tariffs for a longer
period of time by creating an artificial barrier. According to an estimate,
consumers will benefit to the tune of Rs 5 crore per day with the launch of
cellular services by BSNL, through lower tariffs and monthly rentals.

Aren’t these enough reasons for BSNL to speed up the issuance of cellular
POs?

Pravin Prashant