China Trade Information

China Mobile is expected to call a GSM network tender this month, China Times reported.

One vendor executive said suppliers were now readying themselves for the tender, which was originally set for December.

Because of their huge scale, China Mobile’s GSM contracts have always attracted the greatest number of bidders and products offered. Mobile’s 2006 GSM network upgrades attracted 59 vendors, bidding with 145 products. Last year China Mobile bought equipment worth 32 billion yuan in two tenders.

Specifics on the size of the first 2008 tender have not been revealed, but almost certainly it will be smaller because tenders have been contracting in size gradually for the past few years.

It is expected to include operational support system (OSS), power supply and other functionality as well as base station.

The tender will proceed in several stages, beginning with the issue of a tender book, followed by the technology evaluation and scoring. Then vendors will set their commercial prices, following which the provincial operators will advise on the volume of equipment required and then the parties will reach agreement and sign contracts.

China Mobile’s tenders used to be driven by the provincial operating companies, but have been increasingly centralized in recent years, with a predictable impact on vendors’ prices.

A China Mobile internal document said, “A whole-of-group ‘great effort’ tender can full bring into play our strengths of scale and greatly reduce the entire cost of the tender.” Using this approach it had cut procurement cost by “more than half” in 2006, the document said.

All major domestic and foreign equipment suppliers are expected to mount bids for the 2008 contracts. Ericsson, Huawei and Nokia-Siemens took 26.5%, 23.6% and 19.7% share respectively of last year’s tenders.

A foreign vendor exec confirmed that the centralized tender process had forced suppliers to cut their prices. He added that centralized purchasing played to the price-competitive strengths of local champions Huawei and ZTE. He said there was virtually no profit in the business for foreign vendors, who took part in order to keep up their global market share.

Tags: China-Mobile, GSM, Huawei, Nokia, Siemens, ZTE

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