Vodafone Idea Limited, the newly merged entity, is now planning to renegotiate terms with its equipment vendors. The leading telecom player with over 400 million subscribers plans to form realigned commercial links with partners including Nokia, Ericsson, Huawei and ZTE.
The merged entity is taking this step in order to bring down the number of telecom equipment partner per circle down to one, from the present number of three. According to Telecom Talk, this step is part of the site-rationalization and network-integration exercise, which will benefit the combined entity. Nokia currently caters to Vodafone Idea Limited in 15 circles while Ericsson provides equipment in 14 circles. Huawei and ZTE, the two Chinese vendors supply equipment to the company in seven and three circles.
The move can also be seen as an attempt from Vodafone Idea Limited to move away from its dependence on Chinese vendors. Earlier, it was reported that Department of Telecom is considering implementing a ban on Huawei and ZTE. The move will mimic similar actions taken by government in the US and Australia. These steps are believed to be taken in order to keep these Chinese vendors away from the 5G rollout.
Vodafone Idea Limited’s strategic decision could impact the revenue of Huawei and ZTE, who stand to loss as part of this rationalization measure. With its rationalization activity, Vodafone and Idea Cellular will try to merge circles where both of them have equipment. This will also help the merged entiry to save on rentals. Deutsche Bank told Economic Times that Vodafone Idea Limited stands to save Rs 22,000 – Rs 25,000 per site.
“Nokia has been a long-standing partner of both Vodafone and Idea across technologies, and would continue to support it through this period of consolidation to ensure seamless network integration while making it future-ready,” Sanjay Malik, head of India Market at Nokia remarked recently.
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However, the global analysts believe that keeping Chinese vendors out of 5G roll out will lead to higher cost for these telecom companies. Chinese experts recently warned that by eliminating Chinese vendors, India could slow down roll out of 5G and increase capital expenditure.
“Avoiding Chinese vendors, like some international telcos, may lead to higher capex outflow towards network equipment,” Bank of America – Merrill Lynch said in a statement. It is not immediately clear whether Vodafone Idea Limited will get rid of Chinese equipment vendors but refarming network infrastructure will help the company cut down on cost.