India tells two state firms not to use China telecoms gear, source says

NEW DELHI (Reuters) - India has told two state-run telecoms firms to use locally-made rather than Chinese telecom equipment to upgrade their mobile networks to 4G, a senior government source said on Thursday.

New Delhi’s move comes amid a backlash against companies from China after the killing this week of 20 Indian soldiers by Chinese forces in a Himalayan border dispute.

The instruction is aimed at Chinese telecom gear makers Huawei and ZTE, the source said, after India last year announced an almost $8 billion plan, some of which was earmarked for network upgrades, to help loss-making operators Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) MTNL.NS.

“Since that plan will be funded by public money they (BSNL, MTNL) should try to ensure they buy made in India equipment,” the government source, who declined to be named as the order was not public, told Reuters.

India's department of telecoms did not respond to a request for comment. The head of BSNL and MTNL MTNL.NS did not answer calls or messages seeking comment.

Huawei [HWT.UL] declined to comment and ZTE 0763.HK, which potentially risks losing tens of millions of dollars in orders, did not respond to a request for comment. The Chinese embassy in Delhi did not immediately respond to a request for comment.

Chinese companies face a public backlash after the worst clash since 1967 between China and India, where anti-Chinese sentiment is already strong.

Beijing has also come under fire over the coronavirus outbreak, with social media campaigns urging Indians to boycott Chinese goods.

The effective ban on the use of Chinese network gear could extend to private telcos like Bharti Airtel BRTI.NS and Vodafone Idea VODA.NS which also use it in their networks.

“There will probably be some communication... may be not a cease and desist, but a plea to avoid using Chinese equipment in core networks,” a telecom industry source, who has worked closely with Chinese telecom equipment makers, said.

Any ban could increase costs for Indian telcos, which would have to rely more on European firms like Nokia NOKIA.HE and Ericsson ERICb.ST, as India has limited domestic expertise in telecom equipment manufacturing.

Reporting by Sankalp Phartiyal; Editing by Euan Rocha and Alexander Smith