India’s decision echoes actions by the U.S., U.K. and Australia, which have raised red flags about the companies’ Chinese government links. The U.S. Federal Communications Commission has officially declared both companies national security threats.
The process to auction 5G may spill into next year, according to the officials. A decision on the ban is expected to be announced in a week or two after approval from the prime minister’s office, they said.
A spokesman for the communications ministry and the prime minister’s office didn’t immediately respond to queries seeking comment. Huawei and ZTE didn’t respond to emails seeking comments.
While India allowed Huawei to participate in its 5G trials earlier this year, its stance against Chinese companies hardened after China’s actions along their disputed border in early May. That military standoff, which turned deadly in June killing 20 Indian soldiers and an unknown number of Chinese troops, is now in its fourth month.
In late June, India banned ByteDance Ltd.’s viral short-video service TikTok and dozens of other Chinese apps, citing threats to its sovereignty and security.
“Telecom infrastructure has become part of national security assets and nations are looking at controlling and regulating them just like they do power and water,” said Nikhil Batra, Sydney-based analyst at International Data Corp. “But the Indian market is already battling infrastructure and regulatory problems. The network equipment market is a small one. So India’s challenges will compound from such a decision.”
Telecom companies were expected to invest $4 billion in setting up 5G infrastructure, according to IDC estimates.
That could be tough as companies including Bharti, Vodafone Group Plc and even state-run firms continue to struggle to make existing 4G networks profitable. There’s already heavy reliance on Chinese equipment in its 4G networks. And shutting doors to Huawei and ZTE could increase costs of a switch to 5G by as much as 35%, according to Rajiv Sharma, head of research at SBICAP Securities Ltd.
Reliance could be a serious challenge to Huawei in the world’s second-biggest wireless market after Indian billionaire Mukesh Ambani on July 15 announced plans to soon roll out a 5G network for his Jio Infocomm using a technology developed in-house, without giving details.
His conglomerate has said its carrier won’t need to spend much to switch to the new system, unlike some of its rivals, leaving it immune to political disputes linked to Chinese equipment vendors that global telecommunications companies are embroiled in.
Yet, with its economy headed for a ‘deep slump’ amid a worsening Covid-19 pandemic, the government may not be in a position to push for a 5G spectrum auction in the near future.