Huwaei and ZTE

Huawei (Chinese multinational technology company) is the world’s largest maker of telecom equipment and the second largest globally maker of mobile phone parts.
The company has allowed many companies in developing economies to build large telecom infrastructure at very low costs.
ZTE manufactures patented telecom equipment for telecom operators at very low costs.

Background: USA Bans Huawei Technologies and ZTE

The Federal Communications Commission on 30th June ,formally designated Chinese’s Huawei Technologies Co and ZTE Corp as posing threats to U.S. national security.
Huawei and ZTE have been accused of being close to the Chinese government and spying for them by sharing data of US citizens.

Ban on Huawei Technologies: USA and India

The United States is likely to put pressure on India to cut ties with Huawei Technologies as it has done with other trade allies.
In November 2019, USA made some demand from India to ban Huwaei, but going against it, India permitted Huwaei for SG trials.
Amid current India-China standoff India can reconsider its decision.

Impact of Ban on India

In case India follows the path of USA and bans Huwaei and ZTE in India it will impact the Indian telecom sector in following manner

✓Expansion of SG

✓Cost of telecom operations for Indian telecoms

✓Monopoly of Reliance JIO in SG

✓Duopoly of Samsung and Ericsson

EXPANSION OF 5G Technology

In June 2019, Huwaei said the company was ready to sign a “no backdoor” agreement with the government. Under the agreement, Huwaei would vouch that it will not gain access to any Indian customer’s equipment under any circumstance.
In December 2019, Huwaei was permitted by telecom minister Ravi Shankar Prasad to participate in 5G trials in the country.

Absence of a major telecom equipment supplier like Huwaei can delay the commercial rollout of SG in India by 2-3 years.

Cost of Telecom Operations

The prices of Huwaei and ZTE telecom equipments are up to 30 per cent lower compared to their European competitors like Ericsson.
The reserve price for 8,300 MHz spectrum for the 5G band in India is as high as 5.22 lakh crore.

Huawei has occupied nearly 25 per cent of the total telecom equipment market in India.
While Bharti Airtel uses up to 30% Chinese telecom equipment, including Huawei Technologies for its networks, Vodafone Idea uses as much as 40%.
In absence of low cost equipments, financial viability of 5G Technology rollout by Airtel and Vodafone will be jeopardize.

Monopoly of Reliance JIO in 5G

At present Reliance is the only telecom operator, who does not depend on Chinese firms for supply of telecom equipment.
Reliance is developing its 56 network in collaboration with Samsung.
In a bid to increase pressure on telecom operators to use non Chinese telecom equipments USA designated Reliance as ‘Clean Teleco’

Ban on Huwaei and ZTE will put other telecom operators out of the 56 rollout plan. It will establish monopoly of Reliance in 56 telecom sector.

Duopoly of Nokia and Ericsson

Huwaei, ZTE, Ericsson and Nokia are the four major telecom equipment manufacturers worldwide.
Ban on Huwaei and ZTE will establish duopoly of Nokia and Ericsson in India.
It will increase India’s dependence one region (European) for supply of telecom equipment.

US ban Huawei and ZTE US ban Huawei and ZTE