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China’s loss may aid Scandinavia

india Updated: May 18, 2010 21:30 IST
Manoj Gairola
Manoj Gairola
Hindustan Times

Chinese telecom equipment manufacturers Huawei and ZTE are set to miss the Rs 45,000-crore 3G infrastructure market in India. Citing security related issues, the Home Ministry has not given permission to Indian telecom service providers to buy equipment from Chinese companies.

This leaves the field open for two European majors — Ericsson and Nokia Siemens Network (NSN).

The 3G spectrum auction will be over by month-end.

Over the past two years, Huawei and ZTE have emerged as leading equipment suppliers. The $24-billion (Rs 112,000 crore) Huawei, the world’s second-largest telecom equipment firm, is the main supplier of GSM equipment to Reliance Communications, India’s second-largest telecom operator.

The Chinese duo also supplies equipment to Tata Teleservices, Idea, Aircel and Datacom.

“Operators will have to invest $2.5-3.0 billion (Rs 11,650-13,980 crore) to get reasonable coverage for 3G services,” said Ravi Sharma, executive chairman, CMAI Association.

The government is auctioning three to five slots of spectrum in circles. The total orders for equipment would be between $8 billion (Rs 37,300 crore) to $9.5 billion (Rs 44,270 crore).

In March, the Department of Telecommunications (DoT) sent a notification to all operators saying: “…Security clearance is not granted for procurement of telecom equipment in respect of Chinese OEM firm namely Huawei Technologies, ZTE Corporation, Acelink Technologies and UT Starcom.” In other words, operators can not place orders with Chinese firms.

Operators have no option but to comply. “Why should we consider Chinese vendors for 3G equipment when the government has indirectly banned them,” said head of a telecom service company.

“Denying the Chinese participation in the 3G procurement will allow free access to non-Chinese vendors,” said D.K. Ghosh, CMD, ZTE India Pvt Ltd. “Prices and operators’ project costs will rise.”

The equipment of most Western vendors are today mainly manufactured in China, he pointed out. “Will they be cleared for security?”

Huawei has denied the charges that it is a security threat and has said that it was “willing to cooperate with all the relevant Indian government agencies to help solve their concerns on the security issue.”

With Chinese vendors not eligible, Ericsson, NSN, Motorola and Alcatel Lucent will be the only vendors left in the field. Only Ericsson and NSN have a presence in India.