DoT pushing large indigenous firms toward BSNL’s 4G-network tender

Prospective bidders for the contentious 4G network turnkey contract of Bharat Sanchar Nigam Ltd (BSNL) and MTNL need to have a minimum average annual turnover of Rs 2,300 crore in the past three financial years FY18 to FY20 or calendar years 2017 to 2019.

Their company should be registered in India to be eligible to participate in the tender.

A draft expression of interest (EoI), which is under finalisation by BSNL, has imposed a condition that the intellectual property right (IPR), or the licence for the source code for software of the 4G core elements, which accounts for a large part of the cost of a network, has to be owned by the Indian company and the nature of control should be such that it is enforceable in a court of law in India.

However, only ITI, which is state-owned, does not have to furnish eligibility on its financial turnover if it bids.

The move is significant because it will permit only large Indian companies, with financial muscle especially in the IT space like Tech Mahindra and TCS among others, to be systems integrators. Smaller home-grown telecom equipment players have to join them in a consortium to participate in the tender.

Tech Mahindra and TCS declined to comment on the issue.

Foreign telecom gear makers like Ericsson, Nokia, and ZTE might find it next to impossible to shift their IPRs, which reside abroad, to their Indian companies.

“Will you ask Suzuki or Merc or Apple Inc to shift their IPRs to India? And imagine all the global income from royalty for use of the IP globally shifting to our Indian company and gets taxed here. No other department in the government has asked for such a thing,” said a top executive of a foreign company which makes telecom gear.

Not only that, the technical committee set up by Department of Telecommunications (DoT) for the tender had recommended that only Indian companies headquartered in the country be able to bid, a clause which rules foreign companies out but is expected to be amended by BSNL.

Under the EoI there can be two kinds of bidders – systems integrators or original equipment manufacturers (OEMs) of 4G RAN (radio access network) and the core. If a bidder like a systems integrator is not an OEM of any or one of them (RAN or core), it has to bid as a consortium with those that have the hardware.

However, they can bring in only one company each for offering RAN and the core in the consortium.

N K Goyal, chairman of the Telecom Equipment Manufacturers’ Association, said: “Injustice is being done to BSNL. It is not fair to insist on so-called domestic procurement of 4G when there are no manufacturers available to date. Twenty per cent of the equipment can be earmarked for trials or proof of concept from domestic integrators and the rest from established vendors.”

In keeping with the spirit of Atmanirbhar Bharat, BSNL is planning to invite proposals through the EoI for prior registration and proof of concept from Indian companies interested in participating in the tender.

If an Indian company meets the eligibility conditions, except technical proof of their equipment (as most of them have not been tested on live networks), the bidder has to conduct proof of concept with the existing network of BSNL.

This has been done to ensure that Indian companies which have built their hardware and software in their R&D centres test it out in live networks (for instance, the Centre for Development of Telematics has developed a 4G core). It will be allowed to participate in the bid only after a certificate of successful completion of the proof of concept within four months.

Also, the bidders including the consortium members, if any, cannot hold any equity or have an operating partnership for two years with any mobile company except MTNL. However, they can enter into an operating partnership with other mobile players for limited areas like a government project on smart cities. Goyal has raised issues on permission for systems integrators to bid.

The new EoI is being floated after a previous tender was cancelled because of complaints from homegrown players that it is not compliant with the public procurement policy of the government to encourage Indian manufacturers. However, the recommendations of the technical committee set up by the DoT to come up with another tender has been opposed by BSNL on various grounds. Business Standard News