India amends rules for procuring telecom gear; impact on Huawei and ZTE

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India has taken stringent measures to secure its telecom infrastructure by making amendments to the telecom license rule to mandate the procurement of equipment only from ‘trusted’ sources from June 15, 2021, which means Indian telecom operators can only use equipment that a “Designated Authority” has approved.

The development comes amidst growing concerns over meddling by Chinese elements into India’s critical infrastructure. The New York Times recently reported that the recent electricity blackout in Mumbai — India’s financial capital — might have been connected to a part of a broad Chinese cyber campaign against India’s power grid.

“With effect from June 15, the licensee (telecom companies) shall only connect ‘trusted products’ in its network and also seek permission from the Designated Authority for the upgrading of existing network utilising the telecom equipment not designated as trusted sources.” the amendment issued by the Department of Telecom (DoT) on Wednesday evening said.

“The government through the designated authority will have the right to impose conditions for the procurement of telecommunication equipment on the grounds of defence of India, or matters directly or indirectly related thereto for national security,” the DoT added.

As per media reports, the latest move will restrict Chinese vendors such as Huawei and ZTE in India’s 4G telecom expansion and the upcoming 5G networks.

India’s National Cyber Security Coordinator (NCSC) is the designated authority, which will notify a list of sources or equipment makers from whom “no procurement” can be done. Indian telecom operators will also be notified of the vendors from whom they can procure equipment.

“The current amendments have been necessitated by the need to secure the vital and burgeoning Indian telecom space from untrusted vendors and unwanted elements,” a top government official was quoted as saying by the Times of India.

Notably, India’s second-largest telco, Bharti Airtel, recently awarded a fresh expansion contract worth $40 million to Huawei for its national long-distance optical transport network. Vodafone Idea also said that it is continuing its business with both Huawei and ZTE for radio and transport networks in the country.

The Times of India reported that the Indian government was unhappy with “some of the mobile telecom operators” who continued to source telecom network gear from Chinese companies despite the growing tensions between the two countries.

Indian telcos were reportedly given indication from the Department of Telecommunications (DoT) to go slow on business with Chinese companies; officials told the publication.

The amendment, however, will not impact ongoing annual maintenance contracts or existing equipment deployment by the Indian telecom operators. “…the changes will not affect ongoing annual maintenance contracts (AMC) or updates to existing equipment already inducted in the network as on date of effect.”

A senior executive working with a leading Indian telco separately told the Economic Times that both Airtel and Vodafone Idea will now be in a state of limbo since they will now have to wait for the list before taking any call.

“Although existing equipment one can maintain, new ones will have to be approved. Issue is even if the Chinese vendor is allowed in some part of the network, will a telco want to take the risk? It may be safer to now go for only the ones that have no doubt on them,” the executive was quoted as saying.

Interestingly, Huawei is said to be exploring a joint venture with an Indian company to transfer key telecom technologies for local manufacturing of 5G gear and to assuage the Indian government’s security-related concerns.

“The amendment of the telecom licenses by DoT regarding procurement of telecom equipment was an expected move in light of the 5G auctions. The curbs imposed by Press Note 3 on FDI is prompting policy changes in various sectors. The recent incidents allegedly by Chinese hackers has definitely hastened the process with the Government inclined towards a new national strategy to strengthen the country’s security,” Tony Verghese, Partner, J Sagar Associates, a top India law firm, said in a statement.

Verghese added that telecom equipment plays a vital role in telecom connectivity and data transfer, which directly impacts India’s national security. “Therefore, such a policy decision, which definitely impacts significant market players, clearly conveys the Indian government’s stand on national security.”

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