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Chunghwa Telecom equipment deal questioned

TAIPEI, Taiwan -- Kuomintang (KMT) Legislator Tsai Cheng-yuan (蔡正元) yesterday blew the whistle on what he deemed a questionable equipment procurement deal by state-run Chunghwa Telecom (CHT, 中華電信), while urging company managers to clarify facts on Monday.

According to Tsai, last November CHT spent NT$3.88 billion to purchase 1,000 third-generation (3G) mobile broadband network cellular signal tower equipment units at the average per-unit cost of NT$3.88 million. Tsai deemed the price anomalously high as the company had purchased similar equipment last year at the average per-unit cost of NT$550,000 for newer fourth-generation (4G) signal towers. In addition, 500 signal towers included in the deal were designated for the 3G network.

Tsai further questioned the company's motives in procuring equipment for the older generation network as telecom carriers are gearing up to introduce the 4G network to the market toward the end of this year. “It is as though somebody missed a few spots while wiping their bottoms, leaving a foul stench,” Tsai blasted.

Tsai's allegations were published on his social media account.

In response, CHT stated that Tsai's estimate of NT$550,000 per signal tower is inaccurate, as procurement deals are not a simple matter of dividing total costs by the number of units purchased. The company asserted that the procurement deal had conformed to its stringent protocols, and that the price paid in the expenditure was justified.

According to the company the procurement deal in question included six other core network components including radio network controllers (RNC), access routers (AR), radio network operations support systems (RAN OSS), modules to expand the high speed packet access (HSPA) telephony protocol, antennas and cables, labor, warranty and maintenance contracts, in addition to signal towers. As Tsai did not include all the composites of the procurement deal, his claimed estimation of an inflated per-unit cost is false, CHT said.

On the company's decision to continue procuring 3G equipment despite the impending arrival of the next generation network, Lin Guo-fong (林國豐), president of CHT's Mobile Business Group, explained that infrastructure development is forging forth according to scheduled phases. Each development phase is conducted under different contractual and payment terms, and that varying initiatives in the current and forthcoming network generations cannot be compared. The company stated that currently it has contracted Ericsson and Nokia Solutions and Networks (NSN) to complete its first phase of network infrastructure development, for the total cost of NT$6.26 billion.

Lin also questioned the credibility of Tsai, while Tsai hinted that his allegations were directed at Lin.

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