Chinese telecom equipment maker ZTE has managed to secure a fresh network contract from Indian telco Vodafone Idea – which has raised eyebrows around the industry, as the company has yet to secure “trusted sources” approval from the Indian government.
As per new rules, the National Security Council Secretariat (NSCS) is the designated authority to provide “trusted sources” approval. Under the rules, a telco must provide the NSCS with information regarding vendors and their technology before deploying any new equipment or even performing upgrades and maintenance.
Various vendors in India have reportedly objected to ZTE winning a contract in the country because the rules say it can’t provide equipment to anyone in the country without the “trusted sources” nod. The NSCS is expected to examine industry concerns over the contract.
Earlier this month, Vodafone Idea – India’s third-largest telco by subscribers – awarded a fresh optical transmission equipment network order of around Rs 2.3 billion ($28 million) to ZTE for the Gujarat, Maharashtra, and Madhya Pradesh-Chhattisgarh telecom circles.
As per a report by the Economic Times, ZTE beat out Finnish company Nokia and US-based Ciena to win the contract. Vodafone Idea decided to go with ZTE after the proof-of-concept stage.
Vodafone Idea’s optical transmission network currently features equipment from Huawei, ZTE, Nokia, and Ciena across all telecom circles.
ZTE and Huawei not yet ‘trusted’
Both Huawei and ZTE have not yet received trusted sources’ approval. Notably, their European and US rivals received this approval in 2021, and continue to receive approvals for network equipment contracts on a case-by-case basis.
Reliance Jio and Airtel, the only two telcos with commercially live 5G services, are working with Nokia, Samsung, and Ericsson to supply 5G equipment for their network rollouts, whilst snubbing Huawei and ZTE. (Vodafone Idea has yet to decide on 5G partners due to its ongoing cash crunch, which is also why it hasn’t yet announced a 5G network rollout timeline.)
Limited to legacy networks (sometimes)
Huawei and ZTE’s presence in India is largely limited to servicing existing legacy network maintenance contracts with Vodafone Idea and Bharti Airtel. As per the rules, they are only allowed to replace existing parts, but with government clearances.
Airtel has reportedly been swapping Huawei and ZTE 4G gear with those provided by Nokia, Ericsson and Samsung.
Last year, Airtel awarded two contracts to Huawei similar to the one ZTE just won from Vodafone Idea. Under that deal, Huawei upgraded and expanded Airtel’s National Long Distance (NLD) network. Both contracts were given to Huawei despite the latter not having “trusted sources” approval.
Both Huawei and ZTE – along with other Chinese companies – have also been on the radar of India’s Income-Tax department on suspicion of tax evasion.