The Indian government seems to be warming up to the Chinese vendors, with its recent decision to allow Vodafone Idea to go ahead and award an optical transmission gear upgrade contract to ZTE, as per media reports.
ZTE has been awarded a contract worth INR2000 million ($24 million) by Vodafone Idea to upgrade its optical transmission equipment in three circles of Gujarat, Maharashtra and Madhya Pradesh-Chhattisgarh. However, the government approval was pending, according to media reports.
Vodafone Idea was able to receive an exemption because this is not a new network deployment. ZTE gear would be replacing the already deployed Huawei gear. Even so, some time back, the government had made it mandatory for the telcos to get approval from the government for even maintenance and network upgrade contracts. Sometime back, Airtel had also awarded a small INR1500 million ($18.27 million) maintenance contract to Huawei.
The Trusted Source certificate?
While the Indian Government has refrained from outright banning the Chinese vendors, it has ensured that they are not able to do much business in the country. The government made it mandatory for the service providers to work only with vendors with Trusted Source certificates.
Both the Chinese vendors, Huawei and ZTE, have been trying to get Trusted Source certificates from the National Security Council Secretariat (NSCS). The Trusted Source certificate requires approval from several ministries, including Home, Communications and External Affairs. Most other vendors, including Nokia, Ericsson and Samsung, have already acquired Trusted Source certificate. Huawei and ZTE have now submitted additional documents sought by NSCS to get a Trusted Source Certificate.
This particular deal is likely to be the biggest awarded to a Chinese vendor since the Galwan clashes between Chinese and Indian troops in 2020. This led to the Indian Government banning several Chinese apps and companies, including Bytedance, among others.
Huawei and ZTE gear are part of all Indian networks except Reliance Jio, which, as a rule, decided not to use Chinese gear in their networks. The cost advantage, coupled with the easy payment terms offered by the Chinese vendors, made it very appealing for the Indian telcos to work with them.
Recently, Shein, a major Chinese fashion company, which was banned after Galwan clashes, is going to make a comeback to India. It has signed a deal with Reliance Retail to enter the Indian market. So clearly, there is some thawing of relationships between India and China. Even so, telecom comes under critical infrastructure so government would want to be more cautious.
It is not clear if the recent Vodafone Idea – ZTE deal will be the first of many such deals or if it is an exception. A crucial factor behind India’s decision to unofficially ban the Chinese vendors was clearly pressure from the U.S. agencies. Now, as media reports suggest, there is some improvement in the relationship between the Chinese vendors and the U.S. If this happens, then it is sure to have an impact on the Indian position regarding Chinese gear makers as well.