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The ZTE logo and a sign for 5G are seen at the World 5G Exhibition in Beijing, China November 22, 2019. Photo: Reuters

China’s Huawei, ZTE set to be shut out of India’s 5G trials over national security concerns

  • India’s decision echoes actions by the US, UK and Australia, which have raised red flags about Huawei’s Chinese government links
  • Telecom companies were expected to invest US$4 billion to set up India’s 5G infrastructure, according to IDC estimates

China’s Huawei Technologies and ZTE Corp. are set to be kept out of India’s plans to roll out its 5G networks as relations between the two countries hit a four decade low following deadly border clashes.

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, people familiar with the issue said, asking not to be identified citing rules for speaking with the media.

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

India’s decision echoes actions by the US, UK and Australia, which have raised red flags about the companies’ Chinese government links. The US 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, they said.

China-India border talks stall, sparking calls for Modi to get tough on Beijing

A spokesman for the communications ministry and the prime minister’s office did not immediately respond to queries seeking comment. Huawei and ZTE did not respond to emails seeking comments.

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. That military stand-off, which turned deadly in June killing 20 Indian soldiers and an unknown number of Chinese troops, is now in its fourth month.

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 International Data Corp. “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.”

Telecom companies were expected to invest US$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. And 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, without giving details.

His conglomerate has said its carrier will not need to spend much to switch to the new system, unlike some of its rivals, leaving it immune to political disputes linked to Chinese equipment vendors that global telecommunications companies are embroiled in.

Yet, with its economy headed for a deep slump amid a worsening Covid-19 pandemic, the government may not be in a position to push for a 5G spectrum auction in the near future.