State-run Bharat Sanchar Nigam Ltd (BSNL) is reportedly preparing to take action against ZTE for its failure to supply GSM network gear for millions of lines in the East Zone.

According to a recent report published by the ET, BSNL has sought legal advice to kick off action against the Indian arm of ZTE.

The paper cited an internal BSNL note stating, "In view of the legal opinion, it is proposed BSNL can take action against ZTE for non-submission of unconditional and unequivocal acceptance to advance purchase order (APO) issued for the East Zone."

The note reportedly also said that the action by BSNL the could involve forfeiting ZTE India's bank guarantees against the earlier purchase orders by the state-owned telecom giant for the South Zone and North zone.

Lack of GSM gears in the East Zone derailed BSNL's countrywide 2G expansion plan at a cost of $900 million.

ZTE had bagged the contract last year after edging out competitor bidders like NSN, Huawei, Ericsson and Alcatel-Lucent. As per terms of the contract, ZTE had to supply 2G gear for BSNL's 10.15 million GSM lines in northern and southern states, and an additional 1,300 crore GSM equipment for expansion in lines in eastern states.

Meanwhile, the outsourced 'centralised directory inquiry system' has forced BSNL in Maharashtra to provide the service to subscribers through the local offices. Praveen Malhotra, senior general manager for Maharashtra circle, said that the district-level offices were making necessary arrangements to deliver the service.