Given that the country’s security establishment has raised objections to Chinese companies operating in India in the past, it is no surprise that the government has asked telecom operators to avoid using Chinese equipment in 20 of the 29 states. The impact on equipment prices may also not be as serious as is being made out. Chinese equipment suppliers can still compete in around 40 per cent of the market including states like Uttar Pradesh, Karnataka and Andhra Pradesh and will set benchmark prices that other suppliers cannot ignore. It is inconceivable, for instance, that BSNL will allow Ericsson to supply equipment to it in the north Indian states where the ban applies at a price which is much higher than what it gets from the Chinese Huawei in the southern states. It is also true that several of the top telecom firms, like Bharti and Vodafone, hardly have any Chinese equipment. This suggests that European and US suppliers are delivering value for money and the fear that the ban will solely help them may be misplaced.
It is ironic, of course, that the ban comes after around 75 per cent of the country’s telecom rollout has already been completed. There is enough capacity to meet the telecom needs of around 550 million subscribers, which means more capacity needs to be created for just another 200-odd million subscribers. Immediately, though, since 3G orders will be placed over the next few months, it means Chinese suppliers hoping to get big orders will suffer. The government may have allowed Chinese suppliers to sell equipment in the southern states because they are not border areas. But it is difficult to appreciate why Chinese telecom equipment supplies in Maharashtra are dangerous, but are not a problem in Tamil Nadu. Another issue that the government has to address is the vendors’ access to equipment they supply or maintain. Several years ago, when telephone firms began outsourcing their network operations, it was pointed out that equipment suppliers would not be able to tap into the telecom companies’ network since the operators generated certain vital pass codes for the system and the vendors had no access to them. If this was true then, it has to be true now for Chinese suppliers as well.
