Network gear procurement costs in India will rise by at least 23-30% if China fails to contain the coronavirus epidemic within one month. Airtel, Vodafone Idea have expressed concerns saying they could face hiccups on network maintenance front as scores of Chinese technicians will become unavailable if the raging epidemic continues. The telecom sector being a 24x7 service industry requires a continuous supply of network gear as per an official of Broadband India Forum (BIF). The Chinese supply chains are already facing a slowdown and non-Chinese counterparts will likely charge a stiff premium to meet the sudden spike in demand, he told ET Telecom.
Price of Network Gear and Components Could Rise
“The price of network gear and components in India could easily rise by 25-30% as non-Chinese vendors are bound to levy a premium for meeting any sudden shortfall at the operator-end caused by any supply disruptions in China,” TV Ramachandran, president of BIF said.
Qualcomm, Nokia, Ericsson, Huawei, ZTE, Facebook, Apple, Google, Amazon, Microsoft and Intel are among the key members of this forum.
Swedish Network giant Ericsson chose to downplay the fears saying they won’t speculate on the future implications of coronavirus. The company, however, said they are closely following the latest developments in China and follow recommendations from Chinese authorities and the World Health Organisation.
Telcos though have downplayed the fears regarding spiralling costs saying European vendors will easily step in to contain the situation. They will easily meet supply shortages procuring gear from their local factories in India and also by sourcing from Asian factories outside China.
Telcos Have Adequate Buffer Stock for Now, Says COAI
Rajan Mathews, Director General of Cellular Operators Association of India (COAI), told ET that operators buy from multiple global vendors and have adequate buffer stock for now. He went on to add, “network suppliers also have the option to source for Indian clients from factories in Vietnam, South Korea or Taiwan if the coronavirus outbreak in China lingers for another month.”
He added that companies also have a chunk of idle 2G network gear that can be quickly redeployed in some markets, in case of a gear availability challenge. Matthews, however, acknowledged that Airtel and Vodafone-Idea might face near term network maintenance issues as a sizeable band of Chinese technicians are
Mathews though acknowledged that telcos such as Vodafone Idea and Airtel “could face near-term network maintenance issues if the epidemic doesn’t go away soon as a sizable band of Chinese technicians are involved in critical support functions.”
Airtel and Vodafone typically source around 30% of their network hardware from Chinese vendors Huawei and ZTE. Meanwhile, the operations of Reliance Jio will remain unaffected by the Chinese epidemic as it buys equipment from South Korean Samsung.