If we see the state-run BSNL, its 3G network is largely built by Chinese vendor ZTE taking its share in the total network to 40%.

Any advisory by the government to private telecom operators not to procure telecom equipment from Chinese vendors like Huawei and ZTE, would cost the domestic industry dear. The industry is definitely going to oppose it tooth and nail, especially at a time when it is not in a sound financial position. To be fair, the government has not issued any such advisory to the industry till now but a word of caution in this regard has been sounded by the Cellular Operators Association of India, which has said that geopolitical decisions should be kept separate from commercial ones.

Unlike the mobile handset industry where replacing Chinese supply chain and products is almost impossible, replacement is very much a possibility in the telecom equipment market but this would come at a cost. The size of the telecom equipment market is around Rs 12,000 crore and the share of Chinese products is around 25%. Since there are several European vendors also in this segment, banning Chinese vendors is possible but telecom operators could see an increase in their procurement cost in the range of 15%-20%. In addition, Chinese vendors also provide attractive vendor financing, which may be lost to Indian operators.

The lower cost of Chinese equipment aided by attractive vendor financing saw players like Huawei and ZTE edging out European vendors like Nokia and Ericsson in the last 10 years and grabbing a larger market share in India. The 4G network of Bharti Airtel and Vodafone Idea is largely built by Huawei and ZTE, for instance. Reliance Jio is the only operator which does not have a Chinese vendor but its network is fully built by South Korean Samsung rather than European vendors.

In the case of Bharti Airtel and Vodafone Idea, the 2G and 3G networks were built by Nokia and Ericsson and since the 3G networks are now being upgraded to 4G, the overall share of Chinese vendors like Huawei has somewhat moderated. For instance, for Bharti in the overall network, the share of Huawei is about 30%. In the case of Vodafone Idea it is around 40% because upgradation of 3G to 4G is slow and it has not kept pace with that of Bharti Airtel.

If we see the state-run BSNL, its 3G network is largely built by Chinese vendor ZTE taking its share in the total network to 40%. BSNL does not have 4G so far.

“Geopolitical issues are the provenance of the government and such decisions are distinct and driven by specific considerations. These decisions should ideally be kept separate from commercial ones, which are the provenance of companies,” Rajan Mathews, director general of COAI, said.