India's Vodafone Idea hands $28M optical deal to ZTE – reports

Vodafone Idea has awarded an optical networking gear contract worth 2.3 billion Indian rupees ($28 million) to the Chinese vendor ZTE, according to media reports. The equipment will apparently be used in the telecom circles (service areas) of Gujarat, Maharashtra and Madhya Pradesh-Chhattisgarh (MP-CG).

This is possibly the only new contract awarded to a Chinese vendor in the last two years since the time the government made it mandatory for telcos to buy equipment and services only from vendors with "trusted source" certification. ZTE and Huawei, as Chinese companies, have yet to obtain the required certification. This is also why they have been unable to land any 5G deals.

Certification does not appear to have been a problem for big companies from outside China, including Ericsson and Nokia (Europe) and Samsung (South Korea).

Figure 1: Chinese vendors are out of favor in India.
(Source: Jordi Boixareu/Alamy Live News)

Telcos are also required to obtain clearance from the National Security Council Secretariat (NSCS), which manages the trusted source portal, before they start working with any vendor. Media reports suggest that Vodafone Idea has already informed the NSCS and made the appropriate request.

Chinese vendors might look attractive to Vodafone Idea, which has enormous debts and needs the best value-for-money deals to upgrade and modernize its network. It is also the only Indian telco yet to launch 5G services. Lacking a 5G offer, the company has been losing customers and is under pressure to improve its network.

It is not the only telco dealing with Chinese vendors. Last year, Bharti Airtel awarded a INR1.5 billion ($18.3 million) National Long Distance (NLD) network expansion contract and separate maintenance contract to Huawei. But the deal between ZTE and Vodafone Idea would be completely new, while expansion and maintenance agreements are exempt from the purview of the NSCS.

Reliance Jio, India's largest service provider, remains the only telco to have a policy of not working with Chinese vendors at all.

In a further sign of the clash between Indian authorities and Chinese firms, India's income tax authorities recently raided various Huawei premises across the country. A "lookout notice" was also previously issued for Huawei's local CEO, who was prevented from traveling outside India before being granted relief by India's high court.

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— Iain Morris, International Editor, Light Reading