According to the “Financial Times” report, in the context of the tense border situation, India is trying to eliminate or remove Chinese technology from its telecommunications network.
The Modi government has asked Indian telecommunications companies to avoid using equipment from Chinese companies such as Huawei and ZTE in the future. However, as most telecommunications companies suffer huge losses, the survival of the Indian telecommunications industry without Chinese equipment is also worrying. The Indian edition of the financial media Quartz recently wrote an analysis that :
“Despite international security interests, losing giants like Huawei and ZTE may not be a viable option .” Sonam Chandwani, managing partner of Mumbai law firm KS Legal & Associate, commented .
Why do Indian companies need Huawei?
India’s telecommunications industry relies heavily on Huawei and ZTE, mainly because they are more economical than other options .
Most of Huawei’s revenue in India comes from its 4G network equipment business. India’s two largest telecommunications companies, Bharti Airtel and Vodafone Idea, are its customers. Together, they account for 55% of the Indian wireless telecommunications market. .
On the other hand, ZTE’s customers include state-owned BSNL, which has approximately 40% of its 3G network built by ZTE .
These two Chinese companies have been at the center of India’s 5G ambitions. In 2018, Batty and Huawei conducted India’s first 5G network trial together. Earlier this year, Vodafone Creative announced cooperation with Huawei, ZTE, Ericsson and Nokia for 5G testing.
“Huawei has earned a reputation in the telecommunications industry with its affordable prices, local investments and long-term repayment plans. The Indian telecommunications industry needs participants like Huawei to save it from the sea of suffering .” Chandhwani said.
Fierce competition from Reliance Jio, owned by India’s richest man Mukesh Ambani, has been causing losses to Bharti Telecom and Vodafone’s creativity. In the quarter ended June 30, Vodafone Creative lost 254.6 billion rupees ($3.9 billion), while Batty lost 1593 billion rupees ($2.4 billion).
In addition, the two operators face a large amount of government payments to be settled, which will inevitably lead to further deterioration of their financial conditions.
The adjusted total revenue is a cost allocation method between the Indian government and telecommunications companies that was adopted in 1999. However, for more than a decade, the two parties have been deeply involved in disputes over whether non-telecommunications revenue is included.
In 2019, the Supreme Court of India agreed to the government’s definition of adjusted total revenue, which caused the two telecommunications companies to face payment requirements of more than 1 trillion rupees. So far, the Reliance Jio launched in 2016 alone has paid 1.95 billion rupees for this, which is even more burdensome for the long-established telecommunications company-the telecom department calculated the cost of Vodafone’s creativity to be 582.54 billion rupees , While Batty is 430 billion rupees. They have all requested the Supreme Court of India to provide at least 15 years to settle the fees.
Some people believe that apart from Reliance Jio, Indian telecommunications companies may be slowly heading towards debt collapse and bankruptcy . Any pressure that forces them to abandon Chinese suppliers will only make things worse.
“Switching to other options will be a challenge, especially in terms of finances, because operators are already facing the problem of paying for adjusted total revenue.” said Ankit Malhotra, an analyst at Counterpoint Research in Hong Kong. This will affect Barty and Vodafone more than Jio.”
In addition to the cooperation in the telecommunications industry, Huawei also sells mobile terminals of the Huawei and Honor brands in India. In 2018, Honor was one of the fastest growing brands in India.
Can Huawei and ZTE be replaced?
In addition to Chinese companies, other options for Indian telecom network equipment include Samsung from South Korea, Ericsson from Sweden and Nokia from Finland.
Counterpoint’s Malhotra said that these companies are already active in India, but turning to them completely “may lead to higher procurement costs and reduce competitiveness in the 5G field.”
In addition, some people claim that Huawei is superior to all competitors in quality .
“In the past 10 or 12 years, Huawei has become the product very well, and today I can safely say that he ‘s products, at least in terms of 3G and 4G, certainly much better than Ericsson and Nokia .” India Sunil Mittal, a veteran in the telecommunications industry and chairman of Bharti Airtel, said in 2019.
However, the ban on Chinese equipment will benefit an Indian telecommunications company disproportionately-Ambani’s Reliance Jio.
In July of this year, Ambani announced that Jio Platform, a subsidiary of his flagship company Reliance Industries, has developed its own 5G solution and is ready for field deployment next year. This makes Jio the first Indian telecommunications company with 5G capabilities.
“When other companies are struggling with the additional costs of finance and replacement infrastructure, Jio will enjoy the cost-effectiveness of its internal solutions,” said Malhotra.
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