India to Shut Huawei and ZTE Out from Its 5G Roll Out

India is set to shut out Huawei and ZTE in its 5G roll, signifying escalation of deadly conflict between her and China, which took place in the Himalayan border in May.

Bloomberg reported that India will apply investment rules amended on July 23 that cite national security concerns to restrict bidders from nations it shares land borders with to keep out the companies, according to people familiar with the matter.

The Ministry of Communications will instead return to discussions with private companies, including Reliance Jio Infocomm, Bharti Airtel and Vodafone on approvals for 5G trials. The discussions were halted by COVID-19 lockdowns earlier in the year.

India thus, joins other countries led by the United States, including Australia, Canada and the United Kingdom in rejecting the 5G technology of Huawei and ZTE owing to their tie with the Chinese government.

The ban is expected to be announced in the next few weeks after the approval of Prime Minister, Narendra Modi, according to the sources.

The relationship between China and India soured after the border conflict in early May claimed the lives of about 20 Indian soldiers. India took its retaliation on companies of Chinese origin operating in its territory. TikTok was the first to be banned along with many other apps, and the South Asian giant is widening the scope of its retaliatory actions.

The growing apathy toward Chinese companies in India has offered Indian companies the opportunity to take over their own market. Reliance Jio is set to delve into 5G roll out following owner Mukesh Ambani’s announcement on July 15, that he plans using an in-house developed technology to roll out 5G technology for his Jio Infocomm.

Ambani is counting on his conglomerate to cut the cost of 5G roll out. He said its carrier would not need to spend much to switch to the new system. Amidst calls by the US on its allies to shun Huawei, India is building on the dispute between it and China to promote its own.

Modi has embarked on a ‘made in India’ campaign and the rest of the tech world is running to be part of it. A new wave of interest in India, which is evidenced by the surge in the number of big tech companies investing in the country, sheds light on the changing tide.

Last month, Google invested $4.5 billion for a 7.73% in Reliance Jio, following its $10 billion digital investment in India. Facebook already has a $5.7 billion stake in the telecom giant.

Samsung is on a mission to retake its lead in the Indian market with a new strategy that hangs mainly on offering affordable devices. And that means Xiaomi and Oppo, the leading Chinese brands in India will have to face fierce competition as consumers find Samsung more reliable.

Since June, Samsung has launched seven new smartphones, three of them cost $133,63 (less than 10,000 rupees), including its cheapest Android offering at $75.

But India’s anti-China sentiment comes with a huge price. Telecom companies are expected to invest $4 billion in 5G infrastructure set up, and at a time when India is struggling to contain the ravages of COVID-19, it’s a high price to pay.

Sydney-based analyst at International Data Corp. Nikhill Batra said telecom infrastructure is becoming more of a national security issue, and India has challenges that will compound the infrastructure deficiencies of the industry.

“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. 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,” Bartra said.

Vodafone, Bharti Airtel and state-owned companies have had difficulties providing reliable networks with their 4G technology, 5G network therefore seems like an adventure above their scope. Moreover, India has relied heavily on Chinese equipment for its networks, so funding it with equipment from other countries will likely double the cost.

Head of research at SBICAP Securities, Rajiv Sharma said shutting ZTE and Huawei out could increase the cost of 5G roll out by at least 35 percent.