Controversy Surrounds GSM Expansion Contract in Costa Rica

Strategic Insights -

In September 2004, a contract award to Ericsson for the expansion of ICE's GSM network in Costa Rica was annulled by the Controller General due to alleged irregularities in the bidding process. The controversy began in June 2004, when Ericsson was awarded the contract despite presenting a higher bid than Motorola, and despite Alcatel having built the existing GSM network. The contract was initially agreed in December 2003 but was not finally approved until June 2004. The contract was worth US$130 million and required Ericsson to deliver 600,000 GSM lines in six months.

Key Takeaways:

  • The contract award to Ericsson was annulled by the Controller General in September 2004 due to concerns about the bidding process.
  • Ericsson's bid of US$130 million was higher than Motorola's bid of US$120 million, but lower than Alcatel's bid of US$198.5 million.
  • Alcatel had previously built the existing GSM network for ICE and had a contractual agreement with the operator signed in March 2002.
  • ICE had acquired 365,910 GSM subscribers by June 2004, and had a total of 455,520 TDMA subscribers.
  • The cancellation of the Ericsson contract means that ICE will have to conduct a new request for proposal to award a new GSM expansion contract, which could take at least two years.
  • Alcatel and Ericsson will not be permitted to take part in the new bidding process.
  • The launch of GPRS, which had been delayed since 2003, is now expected to be delayed until Q2 2005.

Statistics:

  • The contract awarded to Ericsson was worth US$130 million.
  • Alcatel's bid for the GSM expansion contract was US$198.5 million.
  • ICE had acquired 365,910 GSM subscribers by June 2004.
  • ICE had a total of 455,520 TDMA subscribers.
  • The new request for proposal to award a new GSM expansion contract is expected to take at least two years.
  • The launch of GPRS is now expected to be delayed until Q2 2005.

Sources:

  • "Controller General annuls Ericsson contract" by Costa Rican regulator.
  • "ICE's GSM network reaches capacity" by ICE.
  • "EMC World Cellular Database".

Note: The exact source for EMC World Cellular Database is not provided in the text.