India may ban Huawei and ZTE from 5G network supply

China’s Huawei Technologies and ZTE will be kept out of India’s plans to roll out its 5G networks, Bloomberg reported.
Huawei and ZTE in India
The South Asian nation will apply investment rules amended on July 23 that cite national security concerns to restrict bidders from nations it shares land borders with to keep out the companies.

The Ministry of Communications will restart pending discussions on approvals for 5G trials by telecom operators including Bharti Airtel, Reliance Jio Infocomm, and Vodafone Idea that were delayed by the lockdown.

India’s decision echoes actions by the US, UK and Australia, which raised red flags about the companies’ Chinese government links. The U.S. Federal Communications Commission has officially declared both companies national security threats.

The process to auction 5G may spill into next year, according to the officials. A decision on the ban is expected to be announced in a week or two after approval from the prime minister’s office.

While India allowed Huawei to participate in its 5G trials earlier this year, its stance against Chinese companies hardened after China’s actions along their disputed border in early May.

In late June, India banned ByteDance’s viral short-video service TikTok and dozens of other Chinese apps, citing threats to its sovereignty and security.

“Telecom infrastructure has become part of national security assets and nations are looking at controlling and regulating them just like they do power and water,” said Nikhil Batra, Sydney-based analyst at IDC.

“But the Indian market is already battling infrastructure and regulatory problems. The network equipment market is a small one. So India’s challenges will compound from such a decision,” Nikhil Batra said.

Telecom companies were expected to invest $4 billion in setting up 5G infrastructure, according to IDC estimates.

That could be tough as companies including Bharti, Vodafone Group and even state-run firms continue to struggle to make existing 4G networks profitable. There’s already heavy reliance on Chinese equipment in its 4G networks.

Shutting doors to Huawei and ZTE could increase costs of a switch to 5G by as much as 35 per cent, according to Rajiv Sharma, head of research at SBICAP Securities.

Reliance could be a serious challenge to Huawei in the world’s second-biggest wireless market after Indian billionaire Mukesh Ambani on July 15 announced plans to soon roll out a 5G network for his Jio Infocomm using a technology developed in-house. Jio won’t need to spend much to switch to the new system.

The Bloomberg report indicated the government may not be in a position to push for a 5G spectrum auction in the near future.