BSNL Blocks Huawei, ZTE Bids

In a move that raises further questions about the future role of Chinese suppliers in the Indian telecom market, state-owned carrier Bharat Sanchar Nigam Ltd. (BSNL) has blocked Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) from bidding for a new GSM network expansion deal.

BSNL is inviting bids for a 5.5 million-line expansion of its mobile network in the Northern and Eastern zones, and has specified that only Alcatel-Lucent (NYSE: ALU), Ericsson AB (Nasdaq: ERIC), and Nokia Networks may bid for the contract.

No financial details have been made public, but based on previous tenders it's likely this GSM expansion deal will be worth around US$450 million to $500 million.

The decision is likely to speed up BSNL's chances of purchasing and deploying the new equipment it needs. The Indian authorities currently require all operators to submit their equipment purchase plans to the government for approval because of security concerns over technology sourced from China, a process that has left India's network operators in limbo, as the Ministry of Home Affairs has not approved any contracts between Indian operators and Chinese vendors since February. Excluding Huawei and ZTE from its plans should ensure speedy approval for BSNL's expansion plan. (See India's DoT Denies Blanket Ban on Chinese Gear and India Watch: Vendor Lockdown.)

The move marks a dramatic turnaround in fortunes for Huawei in particular. BSNL had originally chosen Huawei as one of only two suppliers for its mammoth 93 million-line GSM tender but was forced to scrap that expansion program earlier this year. (See BSNL Scraps Monster Mobile Tender.)

BSNL's example might be followed by other operators, which may also look to exclude the Chinese suppliers from new deals so that their expansion plans don't get held up by the Indian authorities.

But both Huawei and ZTE are working hard behind the scenes to allay the security fears of the Indian authorities, and there is speculation in the market that the current issues may be sorted out by June 15. Industry sources say Huawei and ZTE have both offered to build their own manufacturing plants in India so that any equipment they provide will have been manufactured locally. Such a move, however, would impinge on the duo's ability to offer much lower prices than their rivals. (See Huawei Seeks Talks Over Indian Lockdown and ZTE Embarks on Indian Charm Offensive.)

— Gagandeep Kaur, India Editor, Light Reading

eurichardson 12/5/2012 | 4:34:30 PM
re: BSNL Blocks Huawei, ZTE Bids

There was a recent article in the Economic Times that the Indian Intelligence Agencies have concluded that the Chinese Army (PLA) has become more involved in Huawei recently.  Apparently, even British intelligence agencies have warned that the Chinese could cripple IT-dependent telecom infrastructure and critical services like water, power and food supplies by embedding malware in equipment installed by firms such as Huawei and ZTE.

According to the Indian Intelligence Agencies, the Chinese firm not only shares ties with the Chinese security establishment but is also suspected to be a part of its intelligence set-up.

"Huawei, intelligence inputs collected over a period of time point out, is responsible for sweeping and debugging all Chinese embassies and their expertise extends to bugging of the target telecommunication and computer systems. This explains Huawei’s involvement in projects for military purposes in Iraq during the Saddam Hussein regime and also in telecom projects in Afghanistan during the Taliban rule."

Iknownothing 12/5/2012 | 4:33:26 PM
re: BSNL Blocks Huawei, ZTE Bids

If their business ethics are anything go by then I suppose anything is possible...

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