India Inc bats for Chinese telcos

Indian telecom operators came out in open support of Chinese equipment makers, saying the government cannot deprive Indian consumers of the cutting-edge technology which these companies offer by denying security clearance to them.

Top Chinese telecom gear makers, Huawei Technologies Co and ZTE Corp, have been blocked from selling equipment in India, although the government denies it has imposed any such ban.

Chinese firms won the backing of Indian companies on a day when the brass of ZTE called on Union Home Secretary G K Pillai in Delhi in an effort to allay the government's security fears. Chinese equipment makers, including ZTE and Huawei, have been denied security clearance to sell their networks to Indian companies. Top executives from Huawei have also sought time from Home minister P Chidambaram and principal secretary to the prime minister, T K A Nair to discuss the same issue.

"The Chinese are the leaders and have undertaken major R&D (research and development) and they control 50 per cent of the global market," said Anil Sardana, managing director of Tata Teleservices, which has bought substantial Chinese equipment. "By subverting the technological innovations and particularly dollar-to-delivery efficiency, which are by far the best from these Chinese companies, you are not allowing consumers access to new technology."

Sardana said for CDMA players, such as Tata Teleservices, choice is already limited, as there are only three suppliers of core network equipment--Huawei, ZTE and Alcatel. All other suppliers have stopped R&D in core CDMA technology. European and American suppliers do not meet criteria of new generation networks and most have stopped CDMA equipment production.

"In fact, earlier we had 100 per cent non-Chinese network equipment. In the last 30 months we had to swap them with Chinese equipment, as those equipment makers stopped R&D and production. How can we be denied the right to expand our network?" asked Sardana.

Tatas, he said, have been denied permission to import even computers and servers from China because of the security concerns. The views were echoed by the Cellular Operators Association of India, the industry lobby for GSM players.

"Operators who have given orders in December are all stuck and this will obviously impact roll out of networks if permission (to import from China) is not given," said Director General Rajan S Mathews. He said COAI has made a presentation to the Department of Telecom (DoT) on this issue.

COAI has also opposed a DoT directive that asked equipment suppliers to transfer technology to the Indian operator within two years of import. This would have serious implications for Chinese companies who are exporting equipment to India. In a letter to DoT, COAI has pleaded that this clause be dropped as operators fear such a move would severely restrict their choice of equipment makers.

The problem, COAI said, arises from the fact that DoT wants telecom operators to  give an undertaking that their equipment is clear of all spyware. But, they have made it clear to the government that they do not have such testing facilities. In case an operator gives an undertaking and DoT discovers a problem later, the operator could face a Rs 50-crore fine. DoT has said it will start testing in Bangalore-based Indian Institute of Science. "But, there is no time frame and orders have been stuck," Mathews said.

Other operators said this would only bring up their cost of roll out, which has already gone haywire due to the high priced 3G bidding. A director of a leading GSM telecom company, who preferred not to come on record, said: "Whether you have bought Chinese equipment or not is not the issue. The Chinese are price warriors in 3G equipment and if they are not there, the Europeans will only raise prices, which will increase network roll out costs, and eventually, consumers would have to pay more. That is the main fear".

Earlier, emerging out of his meeting with Home Secretary, ZTE managing director D K Ghosh said: "We have put forward our views."

But, insiders said the government did not give any assurances to the Chinese company. It only said it was studying the matter internally and will have a discussion later. The Chinese equipment makers sold over $3 billion worth of telecom equipment in India last year. This constitutes 15 per cent of their total sales.