Airtel gradually reducing dependency on Huawei 4G; set to replace it with Ericsson

NEW DELHI: Bharti Airtel is likely to replace Huawei with Sweden’s Ericsson for 4G network expansion and modernisation in the Rest of Tamil Nadu (RoTN) circle, people familiar with the matter said, as the Sunil Mittal-led telco takes gradual steps towards reducing dependency on the Chinese telecom gear maker.

“Without Rest of Tamil Nadu, Huawei will just have two Airtel circles. Airtel has already stopped giving packet core orders to Huawei for any capacity expansion,” a person said on condition of anonymity. “All such orders have gone to Ericsson.”

Ericsson, which is the second-largest vendor for Airtel, declined to comment. Queries sent to Huawei remained unanswered.

“Airtel has strong relationships with several partners. These partners work across all our domains, radio, core and transport,” an Airtel spokesperson said in a statement to ET.

Huawei had increased its involvement with the Airtel network in 2017 when it got Rajasthan and UP (West) on top of Karnataka and Rest of Tamil Nadu.

But it is now likely to be back to two, with the telecom major, with over 284 million users, in late 2019 having swapped Huawei’s gear with Ericsson’s in the Rajasthan circle. That came at a time when the pressure on Huawei was increasing, mainly from the US, for its alleged proximity to the Chinese government, leading to concerns over possible snooping.

And now, India too has made its security concerns around Huawei clear, especially in the wake of the heightened border tensions with China. New Delhi has already barred state-run carriers from sourcing equipment from Chinese companies Huawei and ZTE, and is believed to have informally nudged private telcos to replace Chinese equipment over time, without disrupting consumer services. Besides the US, even the UK recently banned the purchase of Huawei 5G equipment and said any such gear that’s installed needs to be removed by 2027.

Randeep Sekhon, chief technology officer at Bharti Airtel, previously told ET that alternative suppliers were available if needed. “We will be fully compliant with government orders… To be fair, there are enough suppliers in the world and new suppliers are coming in. India should be fine with it.”

The comments had come soon after the US tightened restrictions on the Chinese vendor, which meant that Taiwanese Semiconductor Manufacturing Co (TSMC), the world’s largest contract semiconductor maker, had to stop taking new orders from Huawei. This is expected to affect Huawei’s supplies globally, including to Indian vendors.

Coinciding with the pressure on Huawei, Ericsson has become more aggressive in the market.

“Ericsson is getting aggressive with its pricing and is being looked like the true alternative, having provided previous-generation technologies,” the person said, adding that the next step for Airtel is to explore similar possibilities in remaining two Huawei circles.

Airtel has recently renegotiated its 4G network deal with Finland’s Nokia in nine circles to supply equipment till 2022. With the likely new deal, Ericsson could be supplying gear in eight circles, Huawei would be down to two and China’s ZTE would be at three.

Airtel though hasn’t moved yet on replacing ZTE, with the focus primarily on Huawei. ZTE supplies equipment to Airtel in Punjab, Haryana, and Kolkata.

“Any uncertainty in future supply of equipment from Chinese vendors like Huawei will hurt telecom users of that equipment. It is natural telcos would want to mitigate the risk,” said Mahesh Uppal, director at telecom consultancy firm ComFirst. “How long will it take and what cost would it entail is something that would be on top of mind of companies given poor financial health of the sector.”

“After the recent global decisions from the US and now the UK, Airtel would definitely be wanting to reduce dependence on Chinese vendors. Especially when its competitor has zero dependence on Chinese vendors,” said Rohan Dhamija, head of Middle East and India (South Asia) at Analysys Mason.

Even Vodafone Idea is believed to have become jittery about sourcing equipment from Huawei, but will find it tougher to replace the Chinese vendors, having signed multi-year deals as recently as 2018 after Vodafone India and Idea Cellular merged, industry executives said.

In fact, the two Chinese vendors had increased their share of the total pie, contributing 35% of the telco’s total network requirements with 65% going to the two European vendors, compared with a 20:80 ratio earlier. Nokia currently provides networks equipment to the combined Vodafone-Idea Cellular entity in nine circles, followed by Ericsson in eight circles. Huawei and ZTE supply equipment to VIL in seven and five circles, respectively.