New Delhi lifts telecom import ban

New Delhi has approved imports of Chinese telecom equipment by Indian mobile operators Reliance Communications and Tata Teleser-vices, ending a temporary ban that had threatened to choke the world’s fastest-growing mobile industry.

Chinese telecom equipment makers Huawei and ZTE paved the way for a resolution by agreeing in principle to give Indian security agencies access to their network source codes – a condition that had prompted outrage among western vendors, who complained it was a violation of their intellectual property.

The import approvals, sent to Reliance and Tata on Thursday night, follow eight months in which India’s 15 mobile operators could not buy foreign equipment even as the industry began preparing for third-generation services.

India harbours a deep distrust of its neighbour. It fought a war with China in 1962 and the two countries still dispute parts of their mountainous border.

New Delhi in December ordered that Chinese telecom equipment imports be screened for security reasons, worrying Huawei and ZTE, which cannot afford to miss out on a market that is second only to China in terms of subscriber numbers with 636m users.

In the ensuing months, the Indian government proposed a slew of regulatory requirements for telecom equipment imports.

The most controversial was the proposal requiring vendors to deposit their network source code in an escrow account with the authorities, a plan that provoked outrage among European vendors, which said it was a violation of international trade rules.

“We are confident these concerns will be resolved in a way that allows us to continue to do business in India,” said Rajeev Singh-Molares, president of Asia Pacific for Alcatel-Lucent.

However, even as European vendors resisted the plan, the Chinese equipment companies “called New Delhi’s bluff” by agreeing to the idea, said a telecom executive in Mumbai.

One Chinese senior executive said: “We are ready to comply with any country’s regulations as long as they are in line with international practice. Putting source code in escrow . . . is not unheard of.”

Industry insiders said while the Chinese vendors had agreed in principle, it was unclear when the government would implement the escrow proposal.

The contracts approved this week required only a guarantee from the Chinese vendors and from the network operator that the equipment contained no “malware” used for spying.

Any violations carry a Rs500m ($11m, €8m, £7m) fine plus a fine equivalent to the value of the order, said the industry executive.

ZTE said on Thursday the temporary ban had caused a fall in its revenue from Asia in the first six months.