In an unprecedented move, Indian government has put a complete ban on the import of telecom network equipment from all the Chinese vendors including ZTE and Huawei. The move will have major repercussions for the Chinese telecom industry as India is one of the biggest and fast growing telecom market of the world. The Chinese companies will lose a lot of business because of this move. According to Hindu Business Line:
The Government has officially told mobile operators not to import any equipment manufactured by Chinese vendors, including Huawei and ZTE. Though the Department of Telecom had been informally telling the operators to keep away from Chinese telecom equipment, this is the first time that it has sent an order banning Chinese gear.
The order was sent out by the DoT on Tuesday to some of the operators that were planning to buy equipment from Chinese manufacturers. The ban order follows concerns raised by the Home Ministry that telecom equipment from some countries could have spyware or malware that gives intelligence agencies across the border access to telecom networks in India.
The Government had earlier banned import of Chinese handsets without IMEI number. The DoT move is a huge blow to ZTE and Huawei that are betting big on the Indian market. ZTE had a record-breaking performance in the last fiscal in India by registering a 50 per cent increase in sales compared with the previous year. The ban also puts the new mobile operators in a quandary as most were banking on attractive financing schemes by Chinese vendors to purchase network equipment. The biggest gainers from the move could be European and American vendors that have been losing market share to aggressive Chinese equipment-makers.
The two major affectees of the decision are ZTE and Huawei, which are already involved in telecom deal in the Indian market. According to Telecom Asia:
The two vendor both have major businesses in the fast-growing India market, which last month racked up 20 millon net mobile adds. Huawei reportedly notched up $1.3 billion in revenue in India last year. Its Bangalore R&D facility is its largest outside China.
ZTE, which sourced $750 million sales from the market in 2009, told the FT yesterday that said the situation was “not normal commercial behavior but something related to political factors. ” The order reportedly came in the wake of Home Ministry concerns that telecom equipment from some countries could contain spyware or malware.
In December, the DoT reportedly amended mobile operator license conditions, with the stipulation that procurement plans from foreign vendors needed security clearance. Since the amendment, the government has been blocking applications involving Chinese vendors, says the FT. This week’s DoT issued order appears to make the blockade of Chinese equipment official.
If the Chinese retaliate to this Indian move, it will severely affect their economic ties and prove to be a major blow to Indian Software industry as they have extensive business dealings in China.