RCom GSM order: 80-100 mn lines

To account for 10% plus of 3-yr global output.

Reliance Communications (RCom), the Anil Dhirubhai Ambani Group-promoted telecom company, has floated an order for 80 million to 100 million lines for GSM mobile services.

The company recently received spectrum from the government to launch GSM services in 14 service areas under a controversial new cross-over technology policy.

This will be the country's largest order for telecom equipment and one of the world's biggest. The installed production capacity of GSM electronics worldwide is 250 to 300 million lines annually, suggesting that the order could account for more than 10 per cent of global production over the next three years.

The order, which will be spread over three years, is expected to be finalised in the next few weeks.

The company has begun discussions with leading equipment manufacturers such as Huawei, Alcatel Lucent, ZTE, Ericsson, Motorola and Nokia, amongst others.

A meeting of potential suppliers has been called at the end of this week to choose the vendors.

An RCom spokesperson declined to comment on the issue.

The largest order placed in India was for 45.5 million GSM lines by the state-owned Bharat Sanchar Nigam Ltd (BSNL). However, the contract ran into a controversy, as a result of which it was halved to 22.75 million lines at a cost of $2.2 billion.

Insiders said RCom is negotiating to cut the cost of equipment significantly by offering vendors a large upfront order to vendors.

Executives involved in negotiations with the company said it has been looking for a 50 per cent reduction in price to its nearest competitor.

In the last big order for GSM equipment, BSNL paid $100 per line for only second-generation (2G) services to Ericsson. The RCom order will have a combination of both 2G (of current level of services) and 3G equipment.

Equipment manufacturers said considering the fact that Ericsson refused to accept the full order after other equipment manufacturers walked out of the BSNL deal, few manufacturers are ready to cut price in the interests of volume.

"The Chinese might offer you lines at $50 (Rs 1,950) per line but they have no back-up support or experience in India. European companies have the experience and installations in India and for that you need to pay a premium," said a executive who is negotiating with RCom.

RCom, which is the country's largest service provider of CMDA mobile services, already has GSM operations in six service areas.

The company has over 40 million customers, of which 35.5 million are on CDMA while the rest are on GSM services. By adding GSM operations in 14 service areas, it will become a pan-Indian player, competing with incumbents such as Bharti Airtel and Vodafone-Essar.

Equipment makers said RCom's pan-Indian GSM plan means that the company will also need to buy more transmission towers. It currently owns about 14,000 towers but will need 50,000 across the country.

So far, the company has commissioned 40,000 towers through its subsidiary Reliance Telecom Infrastructure.