On Thursday, indian government sources confirmed that the government is planning to ban India’s state-owned telecoms operators from buying telecommunications equipment made by Chinese companies such as Huawei and ZTE,media reported. India’s Ministry of Communications has asked Two state-run indian telecommunications operators, Bharat Sanchar Nigam Ltd. and MTNL, to re-bid for previously identified 4G telecommunications equipment in order to exclude Huawei and ZTE, the report said.
India last year unveiled an investment plan worth nearly $8 billion, including one that will be used to help loss-making state-run operators BSNL and MTNL upgrade 4G networks, according to the data. Huawei and ZTE have both been shortlisted in previous tenders.
In addition, the anonymous government source also revealed that not only state-owned telecom operators are affected, India’s Ministry of Communications may also prevent private telecom operators from purchasing Chinese companies’ telecommunications equipment.
India’s move is widely seen as further retaliation for the recent sino-Indian border conflict.
India’s communications ministry did not respond to a request for comment, Reuters reported. The head of BSNL and MTNL did not respond to calls or seeking comment. Huawei declined to comment, and ZTE did not respond to a request for comment.
There is speculation that ZTE could lose tens of millions of dollars in orders if the news is true. Huawei, too, will suffer.
In addition, Indian officials want operators to increase the procurement of telecommunications equipment by local companies and encourage domestic production.
India’s telecommunications market is now estimated to be about 1.2 trillion rupees ($111.4 billion), with Chinese manufacturers accounting for about a quarter (about 27.85 billion yuan), but the majority is still in the hands of Europe’s Ericsson, Nokia and South Korea’s Samsung.
Analysts say banning Huawei and ZTE from the Indian market could cost domestic companies 10-15 percent more to buy. Because suppliers outside China may generate high premiums for lack of competition. In addition, supply chain problems may arise due to the small number of suppliers available, especially in the United States, Europe and India, where production is still in the works and many manufacturers have not yet resumed production.
The History of Huawei and ZTE’s Indian Market
In fact, over the years, India has repeatedly blocked Chinese companies such as Huawei and ZTE, even though some Indian telecom operators are on Huawei’s side. Years ago, an Indian telecommunications operator has said that China’s telecommunications equipment manufacturers have technology, high quality and low price, service response is fast, the choice of European and American telecommunications equipment enterprises will greatly increase the burden of Indian operators, the pressure on consumers. But the views of local operators have not changed the government’s attitude. Indian authorities have repeatedly blocked the entry of Chinese equipment manufacturers’ products for various reasons, such as prohibiting operators from purchasing Products from Chinese equipment manufacturers on the grounds of “national security” and even imposing anti-dumping duties.
1999-2008: 10 years of rapid growth
Huawei and ZTE began operating in India between 1998 and 1999 on the establishment of a software outsourcing center. In the early years of 1998-2005, their efforts in the area of telecommunications in India were less productive owing to the widespread perception of poor quality of their equipment and major national security concerns.
2005-2006 was a breakthrough year for China, as they used low-cost strategies and various other methods to win business with ITI, BSNL and MTNL. Huawei’s reputation has grown strong as it has successfully entered important government networks, and it has quickly entered the private telecommunications market in India.
Huawei’s low-cost strategy has attracted many of India’s large private operators, who have faltered from fierce competition and lower average unit earnings.
During this time, however, Huawei and ZTE have also been repeatedly under pressure from the Indian government.
In November 2006, BSNL, India’s largest telecommunications operator, announced a $4.8 billion GSM mobile network expansion contract (then the world’s largest GSM order), the results of the tender, Nokia, Ericsson won, ZTE was eliminated. BSNL’s reasoning is that ZTE’s technology is not up to standard. Huawei, on the other hand, doesn’t seem to be in the making.
ZTE was also disqualified in May 2008 for a 40 billion rupee (about 3.7 billion yuan) tender for BSNL, citing technical problems. At the same time, India’s Ministry of Telecommunications has also banned BSNL from purchasing Huawei equipment in the north and east.
Even so, Huawei and ZTE’s businessin in India has grown explosively over the past decade.
Huawei’s business in India generated only $170 million in 2005, according to the data. But by the end of 2008, Huawei had more than $2 billion in contracts in India and $1.3 billion in sales. ZTE’s contract sales in India exceeded $1 billion in 2008.
2009-2020: Under sustained pressure, the increase slows down
After the global financial crisis of 2008, Huawei and ZTE in 2009 saw another opportunity to expand into the Indian telecommunications market. At the time, they offered attractive financing schemes from their state-owned banks, such as china’s China Development Bank, to win a number of important businesses by providing more than $10bn in credit to cash-strapped Indian telecoms customers.
However, it has also drawn opposition from many of India’s homegrown telecoms equipment makers. There are many well-known companies in India, such as Tejas Networks, CDOT Vihaan Networks Ltd, Shyam Telecom, Coral, Telecom Technologies, Matrix Telecom, NMS Works, Midas Communications, Measurement and Control, Engaged in the export of telecommunications-related products and solutions. Major Indian IT companies such as Infosys, Tata Elxsi, HCL Tech and other service companies have also launched some telecommunications products.
In April 2009, Tejas Networks and Measurement and Control, two Indian manufacturers of SDH equipment (Synchronous Digital Hierarchy Transmission Equipment), argued that The cheap sale of SDH equipment in China and Israel in the Indian market had hurt Indian producers. And to the Ministry of Commerce and Industry of India Anti-dumping General Administration put forward anti-dumping investigation.
On December 8, 2009, the Sea of India decided to impose temporary anti-dumping duties on SDH equipment originating in China. The tax rate is calculated on the basis of the import price (CIF) of the SDH product. Among them, xenon Communications Technology Co., Ltd. has a tax rate of 236% of the CIF price, Shanghai Bell Co., Ltd. at 29% of the CIF price, Huawei Technologies Co., Ltd. at 50% of the CIF price, and 236% of the CIF price for other Chinese enterprises, including ZTE. In addition, Hangzhou Isai Communications Co., Ltd. (an Israeli subsidiary in China) has a tax rate of 93% of the CIF price.
This means that the cost and price of SDH equipment exported to the Indian market by Chinese telecommunications companies will increase by at least 30 per cent, Huawei’s costs by 50 per cent, and the cost of ZTE and Xenon Communications by 2.36 times.
On October 19, 2010, India issued an anti-dumping final decision on SDH optical transmission equipment originating in China and Israel, imposing a final anti-dumping duty of 7% to 266% on Chinese enterprises involved.
In addition, the Indian government is also behind the scenes of repeated intervention by state-owned operators, trying to exclude Huawei and ZTE from winning bids.
Public information shows that in 2009, BSNL launched a total of 93 million lines of GSM network global tender contracts (will purchase 25 million lines in the east, 18 million lines in the western region, 20 million lines in the south, 30 million lines in the north), the original Huawei won the West, South, and with Ericsson to share the order for the East Region, Huawei is expected to harvest a total value of about 2 billion U.S. dollars.
However, BSNL then tore up its contract with Huawei three times, causing Huawei to lose its order in India, and Ericsson was the biggest winner. Although BSNL said at the time that the order was cancelled because BSNL did not accept Huawei’s additional conditions. However, some analysts say the root cause is the intervention of the Indian government.
Then, in May 2010, BSNL announced that it had banned Chinese telecoms equipment makers Huawei and ZTE from bidding for its GSM North and Eastern projects. As for why, kuldeep Goyal, bSNL’s chairman at the time, said: “It is an indisputable fact that equipment from Western European manufacturers is indeed expensive compared to those of Chinese manufacturers.” But the government has instructed us not to order equipment from Chinese manufacturers, especially projects in key areas. “
As a result, The impact of India’s anti-dumping duties and the crackdown by the Indian government has seen significant resistance to Huawei and ZTE’s operations in India in 2010. It has also led to a sharp drop in their revenues.
However, Huawei and ZTE’s operations in India are gradually returning to growth as the subsequent construction of 3G networks begins.
Huawei’s revenue in India in 2011 was $1.2 billion, up about 30 percent from 2010, but still below the $1.3 billion in 2008, according to the data. Similarly, ZTE’s revenues in India have grown slightly, to $700m in 2012, but only half of the $1.5bn in 2009 (India imposes much higher anti-dumping duties on ZTE SDH equipment than Huawei).
However, Huawei was optimistic about the future, predicting sales in India to grow to $2.7 billion in 2013. It is also expected to generate $10 billion in sales in India by 2017.
Although the ideal is very plump, but the reality is often very bone- feeling.
With the evolution of network technology, operators are investing more and more in network construction, and information security is being paid more and more attention by governments. Against this backdrop, Huawei and ZTE’s operations in India have also been met with more resistance from domestic suppliers in India and from the Indian government.
In October 2012, the U.S. Congress released a report that made five key recommendations to the U.S. government that Huawei and ZTE’s devices pose a threat to U.S. national security and that the U.S. government ban Huawei and ZTE devices. This has also raised concerns among pro-American Indian authorities. Subsequently, the Indian government convened a high-level meeting to discuss whether to investigate China as ZTE.
In the same year, India’s Ministry of Communications announced new regulations to promote the manufacture of network equipment. Under these rules, mobile companies will need to procure 80 per cent of their network equipment and other related infrastructure from local suppliers by 2020. Obviously, this is bad for Huawei and ZTE.
To that end, Huawei and ZTE are seeking to become India’s “domestic manufacturers” as they have invested in large local manufacturing plants in Chennai and Manesar, India, and meet the required local value-added standards for the deployment of local resources and the procurement of raw materials. However, their applications were rejected by the Indian government. This has also led to many devices such as SDH fiber transmission systems, DWDM, GPON microwave wireless systems being labeled as “security-sensitive”, mostly from suppliers with the status of “domestic manufacturers” in India. This also makes Huawei and ZTE’s operations in India’s communications equipment sector severely restricted, making it difficult to bid for all government-controlled or publicly owned (PSUs) core projects in India’s engineering sector.
In early 2018, the U.S. continued to urge its allies to disable Huawei and ZTE’s communications equipment, especially in 5G networks, after the U.S. blocked devices in China and ZTE on security grounds. As a result, in September 2018, India’s Ministry of Communications announced that huawei and ZTE had been banned from participating in the country’s 5G use case trials for “security reasons.” A month later, however, India’s Ministry of Communications announced that it was considering including Huawei in the planned 5G trial, which began in January 2010, and Huawei has received an invitation from the Indian government.
Now, the Indian government’s plan to ban India’s state-owned telecoms operators from buying telecommunications equipment produced by Chinese companies such as Huawei and ZTE is “capricious”.
India still can’t live without Huawei, ZTE
For Huawei and ZTE, Huawei and ZTE have invested heavily in India for more than two decades to expand into the Indian market.
But Huawei and ZTE’s expansion in India’s telecoms market has been constrained. Huawei and ZTE applied to India’s Committee for the Promotion of Foreign Investment in 2002, 2005 and 2007 in the hope of expanding, but the Indian government rejected their applications for “security reasons”. It was many years before it seemed to be slightly released.
Huawei has a Global Network Operations Center (GNOC) and a Professional Center (COEs) in Bangalore, according to a previous filing. In addition, Huawei has established two international business units in India, the Global Service Resource Centre (GSRC) and the Global Solutions Service Center (GSS), to manage the interests of overseas telecommunications customers across multiple regions. ZTE also has 23 offices in India. And Huawei and ZTE have both put the production of telecommunications equipment in India.
From the previous data, we can see that from 1999 to 2008, Huawei and ZTE in india from scratch, growth from scratch, to 1.3 billion U.S. dollars and 1 billion U.S. dollars (a total of about 16.27 billion yuan), to take a lot of market share, can be said to be very fruitful. But 11 years have passed since 2009, and the two companies’ revenues in India have not increased much since 2008.
Previous data show that the current annual revenue of Chinese manufacturers in the Indian telecommunications equipment market is about RMB27.85 billion, and in addition to Huawei and ZTE, there are other Chinese telecom equipment manufacturers such as This Fire, Shanghai Nokia Bell, Datang, if Huawei and ZTE take 80% of the total share, that is, about 22.28 billion yuan, compared with 16.27 billion yuan in 2008, an increase of only 36.9% in 11 years, a compound growth rate of less than 3.4%. This is exactly what the Indian government is struggling to grow under the constant pressure. It should be noted, however, that the overall Indian telecommunications equipment market grew relatively slowly during this period.
In terms of the global market, Huawei and ZTE are the world’s leading mobile network equipment manufacturers, and the few communications equipment manufacturers that can build 5G networks. Huawei has been firmly in the global communications equipment market share for many years. Huawei and ZTE have already shipped large quantities of 5G base stations, and Huawei and ZTE have been in the top five global applications for 5G patents. More crucially, Huawei and ZTE’s communications equipment are not only performing well, but also cost-competitive, compared with other communications equipment makers such as Nokia and Ericsson.
For Indian operators, although The country’s population is large, operators are using low prices to attract users because of the low level of overall economic development and low per capita spending power. India has a large number of operators and fierce competition in the market, especially in recent years, when Reliance Jio has launched a 4G traffic price war (data show that India is already the cheapest country in the world for mobile traffic charges in 2019, with an average price of just $0.26 per gigabyte), making both state-owned and private telecommunications operations in India badly lossed. So there is little interest in burning 5G.
India had planned to auction the 5G spectrum in April, but many Indian operators, already losing money, said they could not bid because of the high floor price of the spectrum auction (InJ 4.92bn/M, or about $70m/M) and the allocation of too little bandwidth. It also forced the Indian government to postpone the spectrum auction until 2021.
Other operator executives said the government had delayed spectrum auctions because it was unclear whether Chinese suppliers Huawei and ZTE could deploy 5G technology in India.
Clearly, the cost of upgrading, maintaining existing networks or building new 5G networks is critical for Indian operators that are in the midst of sustained losses. If the Indian government disables the equipment of Chinese e-commerce equipment manufacturers such as Huawei and ZTE, the most affected will eventually be India’s telecom operators, who will have to pay higher prices to buy equipment from foreign manufacturers such as Ericsson and Nokia, and the cost will undoubtedly rise significantly, which will directly undermine the incentive for Indian operators to build 5G networks.
Editor:Core Intelligence – Sauer Sword