DoT's demand for assessment reports on Chinese tech gives jitters to Airtel, Vodafone Idea; replacement may cost $2-3 billion

Huawei

Bharti Airtel and Vodafone Idea are concerned about the Department of Telecommunications' (DoT) demand to assess legacy network equipment and software from "non-trusted sources" or Chinese vendors such as Huawei and ZTE. They argue that providing such an assessment is challenging due to the numerous mergers and acquisitions these companies have undergone over nearly three decades. Despite reminders, both telcos have yet to furnish the required details to the department.

Earlier this year, the DoT asked telecom operators to evaluate the extent of their legacy network equipment sourced from "non-trusted sources" and send a detailed assessment report including software and hardware deployed since they started operations in the country.

Through this assessment, the DoT aims to understand the potential costs involved in replacing such legacy equipment with new equipment procured from "trusted sources" to enhance national security in the future.

"It's a pending demand for telecom operators. We have had meetings with them and asked them to furnish the report. We are yet to hear from them despite reminders," a top government official told Moneycontrol.

The US replacement

The DoT's proposal is similar to the "rip and replace" program implemented in the United States, where the government provided funds to reimburse telecom companies for replacing equipment considered a national security risk.

Launched by the Federal Communications Commission in 2020, the US program initially allocated $1.9 billion. Due to underestimated costs, an additional $3.08 billion was proposed in 2024, along with extended deadlines for equipment replacement. Reports say that five telecom operators in the US have replaced Chinese-made equipment since January 2024.

In addition to the US, the UK recently banned the purchase of Huawei 5G equipment and said any such gear installed must be removed by 2027.

The official, however, said that the government would make any decision to ask telcos to swap non-trusted network hardware and software with trusted sources of technology when it knows the scale of the non-trusted or Chinese technology deployed and the associated cost of replacing it.

"With the self-assessment, we also want to estimate the financial burden on operators for equipment replacement and gauge the extent of government support required in case of any future directive to replace such technology…There is no immediate plan to order the removal of non-trusted equipment from Indian networks," the official said.

According to industry experts, Airtel and Vodafone Idea will need $2-3 billion to remove Chinese telecom hardware and software from their live networks in the country.

In December 2020, the government announced the National Security Directive on the Telecommunication Sector, mandating service providers to buy equipment only from "trusted sources". The directive came into effect in June 2021.

The directive was in line with global concerns about Chinese equipment companies being utilised for spying on countries.

"In the future, these telecom companies will need to upgrade their networks by integrating new technology, which must comply with the rules and regulations set by the National Cyber Security Coordinator (NCSC). Eventually, equipment and software from non-trusted sources must be replaced with technology from trusted sources," another official said.

Since introducing the directive, major multinational telecom companies like Ericsson, Nokia, Samsung, Cisco, Mavneir, Ciena, and home-bred Tejas Networks have received trusted source approval from the National Cyber Security Coordinator (NCSC). China's Huawei and ZTE have not received approval from the NCSC to date, as they have not met the requirements necessary for clearance.

"It is practically impossible to give details since day 1. The DoT has asked for the database of every detail of the network equipment deployed and the software part. Although we are trying since it is a demand from them which we can't ignore," a senior executive at one of the top three telcos told Moneycontrol on the condition of anonymity.

Airtel selected Ericsson, Nokia, and Samsung for its 5G network in 2021, effectively eliminating Huawei and ZTE from the race. On the other hand, Vodafone Idea is yet to give any contract for its 5G network and continues to engage with Ericsson, Nokia, Samsung and Mavenir for long-term 4G and 5G rollout contracts.

Since implementing the trusted sources regime, Huawei and ZTE have mainly worked with Vodafone Idea and Bharti Airtel to maintain their network contracts. However, they are only allowed to replace current components, and any network upgrades still require government clearance.

Reliance Jio, on the other hand, hasn't used any Chinese equipment for its 4G and 5G networks. It uses equipment from Nokia, Ericsson, and Samsung. It has also deployed its own indigenously developed wireless equipment and telecom software.

Recent contracts awarded to Chinese firms

Notably, between 2021 and 2022, Airtel awarded Huawei a telecom infrastructure expansion contract worth Rs 450 crore to upgrade and expand its National Long Distance (NLD) network. Similarly, in April 2023, Vodafone Idea granted a new optical transmission equipment network order worth around Rs 230 crore to Chinese company ZTE for Gujarat, Maharashtra, and Madhya Pradesh-Chhattisgarh (MP-CG) to enhance its network.

These contracts were awarded to Huawei and ZTE under special permission from NCSC despite the absence of approval from trusted sources.

Airtel and Vodafone Idea didn't respond to Moneycontrol's queries.

For its 4G network, Vodafone Idea previously awarded contracts to Huawei for regions including Delhi, Kerala, Odisha, Punjab, Bihar, and Karnataka. Meanwhile, Airtel assigned network deployment contracts to Chinese vendors for four circles: Karnataka, Punjab, Kolkata, and Tamil Nadu (RoTN).

Although Airtel has reduced its reliance on Chinese vendors by replacing 4G wireless equipment with that from European suppliers, it continues to use Chinese technology for its core and wireline networks.

State-run BSNL had also sourced wireless and wireline network equipment from Huawei and ZTE over the years but barred them from participating after introducing the trusted-sources regime.