Nortel wins Indian wireless contract

Nortel scores its first major wireless deal with an Indian service provider.

Nortel Networks has won its first major wireless contract in India.

Earlier this week, Indian newspapers reported that Nortel has won a major portion of an $863 million wireless contract with Bharat Sanchar Nigam (BSNL), India's largest phone provider. Nortel will split the contract with Nokia.

Together Nortel and Nokia will provide equipment to build a wireless network capable of supporting 11 million subscribers, according to reports. Nortel will supply seven million lines, while Nokia will supply 4 million.

Nortel officials confirmed that it had received a "nonbinding advance purchase order (APO) from BSNL." The company also said that it will supply gear for the east and south regions of BSNL's proposed national GSM (Global System for Mobile Communications) network in India. But it declined to give further details.

Analysts had already expected Nortel to win the majority of the contract. In June, Indian press agencies had reported that Nortel was emerging as the lowest bidder, while Nokia was indicated as the second-lowest bidder.

The BSNL deal is an important win for Nortel, since it is the first major wireless contract the company has won in the emerging Indian wireless market. The only other high-profile win the company has announced in India is a deal with Reliance Telecom to supply it with optical networking equipment.

India and China are important markets for suppliers of IP networking and wireless gear. Experts expect growth in countries such as India, China and Russia to push the number of PC users to over 1 billion by 2010. The statistics are also encouraging for wireless use. Only about 47 million of India's 1 billion residents subscribe to a cell phone service. Analysts expect that number to triple to more than 140 million by 2008.

Tim Luke, an analyst with Lehman Brothers, said in a research note that he believes the BSNL contract will generate $500 million or more in sales for Nortel over the next several years. He views the contract positively.

"We believe this news serves as another reminder that despite Nortel's recent accounting woes, the company remains focused, competitive and continues to win some fairly significant global business," Luke said in his research note.

A cloud of uncertainty has hung over Nortel for the past several months after its accounting practices came under fire. The company has been reviewing its financial results for each quarter from 2001 through 2003. In its latest update to officials earlier this week, the company said it would release unaudited results for the first half of 2004 on Aug. 19.