India approves Chinese telco gear orders - sources

NEW DELHI Fri Aug 20, 2010 5:33pm IST

The sun rises behind a communications tower in New Delhi March 20, 2006. REUTERS/B Mathur

The sun rises behind a communications tower in New Delhi March 20, 2006.

Credit: Reuters/B Mathur

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NEW DELHI (Reuters) - India has allowed two telecoms firms to buy equipment from China's Huawei and ZTE(0763.HK) after the Chinese firms agreed to New Delhi's tighter rules to address security concerns, sources said on Friday.

This year, India barred some local mobile phone operators from placing orders with Huawei and ZTE on security concerns, resulting from its suspicion that Chinese equipment might have spying technology embedded to intercept sensitive conversations and government communications.

A source with direct knowledge said Tata Teleservices, which had applied for government approval to buy telecoms gear from Huawei and ZTE, received the go ahead after the Chinese firms accepted all the conditions set by India.

"They (Huawei and ZTE) have said they agree with all the new terms and conditions, after which the government cleared applications," the source said.

Last month, India tightened rules for telecom gear imports, saying vendors must allow inspection of their equipment and share design and source codes in escrow accounts.

Separately, an application by Reliance Communications(RLCM.BO), India's second-biggest mobile operator, to order equipment from ZTE has also been approved, another source said.

The Indian government's move to bar the Chinese firms had hit their growth in a booming market that is the world's fastest-growing by subscribers and is getting ready for rollout of 3G and broadband networks

ZTE's second-quarter profit fell below market expectations after the Indian restrictions.

A government minister said on Thursday state-run telecoms carrier Bharat Sanchar Nigam, which was directed in 2009 to not buy Chinese equipment for use in sensitive zones near the country's land border, is now free to deal with Chinese vendors on the basis of the tightened gear import rules.

In June this year, BSNL invited bids to supply equipment for 5.5 million GSM lines, but excluded Chinese companies.

Shenzhen-based Huawei and ZTE have taken on global names like Ericsson, Nokia Siemens Networks and Alcatel Lucent in recent years, winning major contracts in both emerging and developed markets and have gained market share in India with their low-cost products.

The standoff on Chinese gear had at one point threatened to snowball into a diplomatic row between India and China, who have been trying to reduce mistrust and improve relations after they fought a war in 1962.

(Reporting by Devidutta Tripathy; Editing by Sugita Katyal)

(For more business news visit Reuters India)

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