India to ban Chinese-made telecoms equipment?

Friday, 16 July 2010 14:38  |  James Barton

The Indian government has apparently banned the purchase of telecoms equipment from Chinese suppliers, in a move likely to unsettle many Chinese operators with an interest in the Indian market.

India’s Department of Telecommunications has officially ordered to country’s operators not to buy telecommunications kit from Chinese vendors, according to various reports from the local press. The official announcement swiftly follows the exposure of a ‘blacklist’ of companies targeted by the ban, the existence of which had previously been denied by the Indian government.

The now-public ‘restricted list’ features a total of 26 firms, of which 25 are Chinese – the remaining company is based in Israel. Among them are such major industry players as Huawei, ZTE and Lenovo China. The ban will come as a blow to these companies; the People’s Daily Online notes that India contributed to 10.10% of ZTE’s global income in 2009, and more than US$ 1.4 billion to Huawei’s global revenue in the last fiscal year. Huawei unveiled plans in January to manufacture telecoms equipment in India, proposing to invest $500 million in an R&D centre.

The Indian newspaper Financial Chronicle reports that telecoms companies have been alerted to the decision prior to an official announcement of the blacklisted companies. Indian firms who flaunt the decision will be hit with legal action and heavy fines.

According to the Hindu Business Line, the ban results from security concerns, with the government worried that equipment from certain countries could contain spyware that would allow intelligence agencies access to India’s telecommunications networks. Security agencies have demonstrated that Chinese equipment contains “black boxes, malware, trap doors, remote or hidden attack facilities through computerised command and control, rendering Indian telecom networks vulnerable.”

Chinese government officials and senior executives of some of the blacklisted firms had met with Indian officials in May in an attempt to avert the ban. Although Chinese companies have not yet been officially notified of the ban, many have stated their willingness to cooperate with security reviews.

The ban will come as a blow to Chinese operators in light of the impending issue of 3G licences in India, which will be followed by network expansion. However, Indian firms will suffer as well – many had planned to take advantage of the financing options provided by Chinese vendors, and will now likely turn to Western suppliers.