The ongoing controversy over security related issues on purchase of telecom equipment will have a significant impact on the Rs 45,000-crore 3G equipment market as Indian telecom operators Bharti Airtel, Vodafone, Reliance, Tata, Idea and Aircel are set to place orders within a few months.
There are five major global suppliers — Chinese firms Huawei and ZTE, and European companies Ericsson, Nokia Siemens Network (NSN) and Alcatel Lucent. In other words, the fight has narrowed between Chinese and European groups.
Airtel and Vodafone use European equipment for providing GSM services, while RCom and Tata Tele use Chinese ones.
“It is economical and easy for operators to expand into 3G services using equipment from existing vendors,” said R.S. P. Sinha, former CMD of MTNL.
Currently, operators are not allowed to buy new equipment from the Chinese vendors. “Security clearance is not granted for procurement of telecom equipment in resp-ect of Chinese OEM firms, na-mely Huawei Technologies, ZTE Corporation, Acelink Technologies and UT Star-com,” a March 2010 Depart-ment of Telecommunications (DoT) notification to all operators said.
However, last week, the government amended the licence conditions and asked vendors to submit their source codes in an escrow account in order to address security issues.This condition is not acceptable to European companies. Ericsson has already expressed its concern to the government.
“Source code is vendor’s proprietary information and most valuable asset of the company,” Ericsson in a letter to DoT said. “Escrowing of source code requirement should be exempted/deleted from the agreement.”
As a result, Chinese operators are now on a stronger wicket. “ZTE is very open and will comply with the requirements of the government,” ZTE India CMD D.K. Ghosh told Hindustan Times. “We have the interests of our country foremost and would not allow anything to happen which is a threat to our security.”