India to insist on local phone making for govt orders

NEW DELHI (Reuters) - Global telecom equipment makers will have to manufacture equipment in India if they decide to bid for orders from state-run carriers, Telecoms Minister Dayanidhi Maran said.

State-run Bharat Sanchar Nigam Ltd (BSNL) is in the process of preparing a more than US$3 billion tender for up to 40 million GSM lines, India's largest telecoms gear deal. Nearly all telecoms gear makers are in the fray for the contract.

"BSNL and Mahanagar Telephone Nigam Ltd boards have decided to make it mandatory for telecom equipment suppliers bidding for BSNL/MTNL tenders to manufacture equipment directly or through contract manufacturer in India so as to ensure the quality, timeliness of delivery and after sales service," Maran said in a statement.

Manufacturing locally will help India, the world's fastest-growing major mobile market, cut network costs in the fast expanding market.

The 63 million strong wireless sector is attracting about 2.5 million new users each month, and growth is set to accelerate as carriers such as BSNL, Reliance Infocomm Ltd and Bharti Tele-Ventures Ltd expand their reach to under-serviced rural markets.

"The department (of telecommunications) also proposes to request private operators to follow this methodology," Maran said.

Companies such as Ericsson, France's Alcatel and Canada's Nortel Networks have already boosted their manufacturing presence in India, either on their own or through local joint ventures.

These firms have won multi-year, multi-million-dollar deals from domestic carriers that are aggressively building networks to soak up surging demand in the country, where just six in a 100 people use mobile phones, compared with about 28 in China.

Most telecom equipment is imported, draining India's precious foreign exchange reserves. The telecoms ministry has a target of attracting at least US$800 million worth of foreign investment in telecoms manufacturing in the year to March 2006.

India's booming wireless sector has grown at a compound 85 percent a year over the past six years -- but tariffs have fallen about 37 percent a year over the last four years and are now the cheapest anywhere in the world.