telecom | IST

Telcos wary of knee-jerk reaction to Chinese vendors; no DOT direction for banning Huawei

Indian private telecom companies are yet to receive any formal direction, or an informal nudge, from the Department of Telecommunication (DOT) to ban or avoid Chinese telecom gear makers such as Huawei or ZTE, revealed sources. However, there is a strong apprehension about “knee jerk” responses against Chinese companies.

Indian private telecom companies are yet to receive any formal direction, or an informal nudge, from the Department of Telecommunication (DOT) to ban or avoid Chinese telecom gear makers such as Huawei or ZTE, revealed sources. However, there is a strong apprehension about “knee jerk” responses against Chinese companies.
Industry insiders warn that any move to sidetrack the Chinese vendors will have “huge” cost implications for the industry. They point out that Chinese equipment suppliers such as Huawei and ZTE were a big part of the 4G rollout in the country and have, as per estimates, a 25 percent market share of the telecom gear industry.
Industry sources also argue that the likes of Huawei and ZTE provide a cost arbitrage of as much as 25 percent in a few cases. Other than the obvious benefit for the bottom line, the cost arbitrage also helps telcos negotiate deals with the likes of Ericsson and Nokia. The industry also appears confident of the technological prowess of Chinese gear makers.
It is estimated that the Chinese gear makers account for about 20-30 percent of Bharti Airtel’s network and about 40 percent of Vodafone-Idea’s. However, Industry sources note that Chinese telecom equipment is not being used for core operations and systems, and therefore, network sovereignty or security is not in doubt.
The industry also cautions that network planning, management, and expansion is an exercise that stretches across 2-3 years, in close coordination with the gear makers. Insiders point out that Telcos have entered into various agreements with the Chinese vendors. The telcos warn that any ad-hoc decision to discontinue would cause disruption and even penalties stipulated in the contracts.
Insiders are also wary of market dynamics in case of a ban on Chinese equipment makers. They fear that taking out Huawei and ZTE would disrupt market dynamics, limit options, eliminate potential savings, and would lead to consolidation of the market under Ericsson and Nokia.