India to bar BSNL from sourcing gear from Huawei, ZTE; may also bar pvt telcos from using Chinese gear

The Indian government will bar Chinese companies from providing any telecom equipment to state-run telcos and may also prohibit private mobile phone operators from using gear supplied by the likes of Huawei and ZTE going forward, a senior official said, marking India’s first major economic reaction to the skirmishes on the border at Galwan region, with Chinese troops.

The telecom department will soon also cancel a 4G telecom equipment tender floated by state-run Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL) and rework it to keep out Chinese vendors, the official said.

“The government has taken a decision to cancel the tender which was floated (by BSNL) earlier this year,” the senior government official told ET. “We will likely also not allow private operators to use Chinese gear in the future and will encourage domestic telecom equipment makers”.


Once signed off, the order will deal a body blow to the Indian operations of Huawei and ZTE who will thus be barred from the country’s commercial 5G deployments.

Currently, industry estimates peg the annual market for Indian telecom equipment to be around Rs12,000 crore, of which Chinese players account for roughly a fourth. The rest of the market comprises mainly of Sweden’s Ericsson, Finland’s Nokia and Korea’s Samsung. Bharti Airtel and Vodafone Idea work with both Huawei and ZTE, besides the European vendors, while Reliance Jio works with Samsung.

The decision, which was taken at the highest levels of the government on Wednesday, comes within hours of the Prime Minister saying that India would retaliate if it were instigated by China.

“We have constantly received complaints from our telecom manufacturers that China is not permitting import of Indian telecom equipment where as it is subsidizing Chinese telecom gear which is then underpriced in the Indian market,” the official said. “As a result, our indigenous telecom equipment manufacturers are unable to come-up".

He added that telecom formed the backbone of critical digital infrastructure and the government is taking decisions to safeguard the country’s security. “The government will also hold a multiple stakeholder discussion with private telecom companies on how to promote indigenous telecom equipment manufacturing in the country.”

India’s private telcos though had been batting for Huawei and ZTE to remain in the fray, as they offered cheaper equipment and also attractive vendor financing options. Analysts say barring the two could lead to a 10-15% rise in gear procurement costs as non-Chinese suppliers could levy a premium. There could be supply chain issues with fewer vendors to choose from, especially with Europe/US battling Covid19.

The decision on Huawei and ZTE though is just what the US had been hoping for amidst its own trade war with China. Washington has been pressuring allies and friendly countries, including India, to bar Huawei, flagging security concerns and citing the company’s alleged proximity to the Chinese government. China on its part has warned India of economic consequences if Huawei was excluded from 5G.

Countries such as Australia, New Zealand, Japan and Taiwan besides the US are keeping Huawei out of 5G deployment, while others such as the UK, France, the Netherlands, Russia and South Korea have allowed the Chinese equipment maker to participate. The UK though is reviewing the impact of the limited role that it had allowed Huawei.

While cancelling the tender floated by the state-run telcos, which had been placed earlier in March, a government committee headed by the telecom department will finalise, in the new tender, the specification of the core and the RAN of the 4G telecom infrastructure to ensure that it has significant domestic content and indigenous technology. “Large Indian companies have evinced interest in providing 4G gear to the state-run telcos,” the official said.