India embargoes Chinese telecom equipment
April 30, 2010

India’s Department of Telecom (DoT) issued an order to Indian telecom operators to ban the import of telecom equipment from China. The DoT ban follows concerns raised by India’s Home Ministry that telecom equipment from some countries could have spyware or malware that gives intelligence agencies across the border access to telecom networks in India. Further, fears of cheaper Chinese equipment being dumped into India also contributed to the recent ban.

The import embargo, which was informally in place since December, has already hurt Chinese telecom equipment manufacturers such as ZTE and Huawei which sell to India. having entered the Indian market five years ago, India is an important market for ZTE and Huawei. In 2008, India accounted for 11 percent of Huawei’s turnover and has contributed US$750 million in ZTE’s turnover.

According to China’s Ministry of Industry and Information Technology (MIIT) China’s telecom equipment sector saw a year on year output decline of 30.1 percent during Q1 2010. During the same time frame, the telecom equipment manufacturing sector experienced a slow growth of 10.7 percent in sales value, while other manufacturing sectors saw a growth of more than 30 percent. Additionally, the sector only grew 2.4 percent in Q1 2010, year or year while others surged more than 20 percent, MIIT said.

“Proposals for procurement of equipment from Chinese original equipment manufacturing vendors have not been recommended due to security concerns,” the Department of Telecommunications wrote this week in correspondence to the prime minister’s Office, seen by the Financial Times. “Therefore, the proposals from the service providers for purchase of Chinese equipment is turned down.”

Besides ratcheting up trade tensions and complaints from Beijing, Indian telecom vendors who were looking forward to expanding network areas are now left stranded. Besides being unable to cope with India’s growing user base – approximately 20 million new users are added every month, Indian telecom operators are also loosing billion of dollars. India is the fastest growing telecom market and lags only behind China in terms of number of subscribers.

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