(Last Updated On: October 1, 2014)

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MTNL’s plans to upgrade its existing 2G and 3G network in the metro cities of Delhi and Mumbai have hit a roadblock as the DoT is yet to clear its grant of Rs. 1,000 crore for GSM network expansion and upgradation.

Finland’s Nokia networks had emerged as the lowest bidder for supplying 2G and 3G equipments in the tenders it floated back in January, 2014.

Due to shortage of funds, MTNL has not been able to pay Nokia Networks and hence has been the reason for the delay in the procurement of 2G and 3G equipments. MTNL even requested Nokia Networks to extend the validity of the bid as it doesn’t want to release the tenders again.

As per the terms, the bids from Nokia Networks are valid up to a period of 6 months. It has been more than 9 months, and MTNL has still not been able to pay Nokia Networks.

It is believed that Nokia Networks has agreed to the request of MTNL and according to a senior executive, “Nokia has also agreed to stagger the supply flow of 2G and 3G network gear to soften the cash outflow burden at MTNL’s end.”

Nokia has denied to reveal more details about this saying that they would not comment on ongoing developments.

MTNL operates mobile, wireline telephone, and broadband services in India top 2 telecom markets. Its inability to upgrade its network and services has led it to losing its edge over the competitors and thus has also lost many of its subscribers.

A report released by Cellular Operators Association of India revealed that MTNL’s subscriber base has shrunk by 1 lakh subscribers from January to June this year. According to estimates it doesn’t stop here and will dip down even further by September end.

MTNL had asked Rs. 2,000 crore from the govt. for meeting its capital expenditure costs related to network expansion and upgradation.

It was planning to spend Rs. 1,000 crore for GSM network expansion, while the remaining Rs. 1,000 crore was to be spent on network expansion plans for landline and broadband network divided equally.

Another executive familiar with the development said that MTNL needed to upgrade its GSM networks to support higher data speeds and also replicate the mobile internet experience as offered by other private companies.

We must say that we also agree with the above statement. Why would anyone want to use MTNL when he is getting similar but better services from other operators at the same price point? MTNL and DoT really need to get their act together or the tender costs will overrun their current budget leading to even more issues for already loss making MTNL.

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