BSNL Enters Tougher Terrain Following Government Restriction on Sourcing Chinese Gear

It remains to be seen whether BSNL issues a fresh tender or issues a clarification on the existing tender over the involvement of Chinese players. While the latest development could be seen as an opening for Indian players including Tejas, Sterlite and Vihaan Networks Limited (VNL), it’s the global players that are dominant in the telecom equipment market.

According to Dell’Oro Group, a company engaged in telecommunications infrastructure research programs, Huawei, Nokia and Ericsson are the top three telecom equipment suppliers. The company said that Huawei has a revenue share of 28% in the worldwide telecom equipment space while Nokia and Ericsson have a revenue share of 15% and 14% respectively. Additionally, ZTE is said to have an revenue share of 11% while Cisco is said to have an 7% revenue share in the worldwide telecom equipment space.

The dominance of Chinese vendors in the telecom equipment space is also attributed to large 4G and 5G patents that are held by Chinese players which enables them to offer equipment at lower price. Huawei is said to hold 25% of the world’s 4G patents with a similar trend observed in the 5G space.

According to IPlytics, a company that maintains a patent database, Huawei has declared 3,325 5G patents with 2,300 of them filed at a patent office like USPTO. IPlytics said that over 1,300 5G patents have been granted to Huawei as of November 2019. Samsung is said to have declared over 2,800 5G patents but has received over 1,700 grants in the same period. However, none of the Indian firms feature on the IPlytics platform.

Restrictions on BSNL Could be Pricier Affair

While the restrictions on Chinese players could lead to an increase in costs for BSNL, the state-run operator already owes a significant sum of money to several vendors.

In December 2019, it was reported that BSNL owed Rs 1,300 crore to ZTE and Rs 1,200 crore to Nokia. Additionally, American Tower Corporation in its first quarter earnings call in April highlighted that around US$16 million in incremental bad debt was recorded in India “due to slow payments” from several players. Crucially, ATC said that BSNL is also one of the operators who is yet to pay but that the operator “has a long history of paying their bills.”

“So we do expect that when the government funding comes through and that could be impacted because of the COVID-19 situation in India, when that comes through, we do expect that those receivables will be paid through that customer,” Rod Smith, EVP of ATC, said in the earnings calls. “Again, our local teams in India that have a very close relationship with BSNL, they’ve been through this before. That carrier pays their bills from time to time. They do have to wait for government funding, however.”

It has to be noted that BSNL has issued tenders to upgrade its sites to 4G as part of its revival package announced by the government in 2019.

With BSNL already under debt to several vendors and with numerous contract workers currently protesting due to the operator not paying salaries, BSNL’s survival could be under significant cloud.