Home > Finance > Vodafone Idea: Airtel, Vodafone Idea may need to spend 5-10% more on network gear if Huawei, ZTE left out

Vodafone Idea: Airtel, Vodafone Idea may need to spend 5-10% more on network gear if Huawei, ZTE left out


Kolkata: Private telecom operators Vodafone Idea (Vi) and Bharti Airtel may have to spend 5-10% more on network gear if Chinese vendors Huawei and ZTE are left out of India’s list of trusted supplier sources, said industry executives and analysts.

This expected increase in gear procurement costs may be tempered, though, since non-Chinese network vendors such as Ericsson, Nokia and Samsung will have less bargaining power in demanding a premium with fewer telcos to choose from.

“If vendor options shrink with the new network security rules, incumbents could face around 5-10% rise in gear purchase costs, which they should be able to easily recover with the next round of price hikes likely soon,” Rohan Dhamija, head (India & Middle East) at Analysys Mason, told ET.

Brokerage ICICI Securities expects the “next round of telco price hikes to happen latest by March 2021” and that this could boost Bharti Airtel and Vi’s average revenue per user (ARPU) by 20% in 2021-22.

Vi and Bharti Airtel did not reply to ET’s queries till press time.

The government had said on Wednesday that it would shortly declare a list of “trusted sources” for acquiring gear for telecom networks and amend telco licences accordingly, a move being viewed as the first official step to keep Chinese network vendors Huawei and ZTE out of India’s future telecom expansion as well as its 5G technology roll-out, amid continuing tensions along the Line of Actual Control.

Apart from China’s Huawei and ZTE, other global vendors supplying networks to Bharti Airtel and Vi are Finland’s Nokia and Sweden’s Ericsson while South Korea’s Samsung is the only supplier to Reliance Jio.

Senior industry executives said the new network security rules will boost indigenous telecom gear manufacturing and drive local value-addition.

“India’s new network security rules will make the country truly aatmanirbhar (self-reliant), both from economic and strategic security perspectives, and spur home-grown telecom gear makers to hit global scale and also drive startups to create strong, trusted network products that can enjoy faster market access,” said Sanjay Naik, managing director, Tejas Networks.

The new network security rules, he said, also pave the way for “a positive list of trusted supplier sources as opposed to a banned list,” which should complement the near-Rs 12,200 crore sops cleared last month by the Union cabinet under the production-linked incentive (PLI) policy for telecom gear that is likely to result in Rs 2 lakh crore of production over the next five years.

Another senior executive of a global gear vendor said India’s insistence on trusted sources for buying telecom equipment has a strong rationale, especially as vulnerabilities around cybersecurity will be far greater once 5G networks arrive, especially since 5G is not merely about connecting mobile phones to the internet but the gamut of home appliances, factory equipment, machines, cars and myriad connected IoT (internet of things) devices.

Since the outbreak of the Sino-Indian tensions in mid-June, the government has unofficially nudged private and state-run telcos to avoid Chinese gear, but the new network security directive is the first official step towards barring their involvement in Indian networks, especially with 5G in mind.

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