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ZTE India: Looks to get a headstart in the 5G space

November 16, 2017
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China-based telecom equipment vendor ZTE has come a long way since it established full-fledged operations in the country in 2003. The Indian market is growing faster than the company’s other markets, with the vendor recording a 173.35 per cent year-on-year increase in net profit for the year ended 2016, reflecting mainly an increase in gross profit and a decrease in asset impairment losses.

At the operations front, ZTE has emerged from being a stand-alone network equipment vendor to a strong end-to-end telecom solutions provider in India. It has renewed its focus on the smartphone and tablet segment, a vertical which it had forayed into in 2013 but did not pursue aggressively. It is also gearing up to feature among the top players in the country’s upcoming 5G market through partnerships with telecom providers.

A look at the recent contracts won by the company, its 5G and smartphone strategies, and the key challenges faced…

Key contracts

ZTE won two major contracts in 2017. The company, along with Nokia, was selected to execute a Rs 60 billion network expansion project for Bharat Sanchar Nigam Limited (BSNL). As part of the network expansion, BSNL will deploy 40,000 additional 2G, 3G and 4G base transceiver stations (BTSs) across the country, increasing its total number of BTSs to 170,000.  ZTE and Nokia will set up 20,000 BTSs each across the four zones – north, east, west and south. Nokia emerged the L1 bidder for the order and will be setting up BTSs in the southern and western parts of the country. ZTE, the L2 bidder, will set up the BTSs in the northern and eastern regions.

ZTE has also secured a contract from Bharti Airtel for the deployment of massive input massive output (MIMO) solutions in the Kolkata circle. MIMO technology ramps up a base station capacity by five to seven times and reduces interference substantially, helping boost transmission signals to devices. It is a key enabler for 5G networks.

Leveraging India’s early 5G push

India plans to roll out 5G services for consumers by 2020. To achieve that objective, the government has recently set up a high-level forum that will evaluate and approve roadmaps and action plans to bring in the latest technology in the country. ZTE, however, expects that 5G may come in even earlier. It has initiated pre-5G trials with Bharti Airtel, Vodafone India and Reliance Jio Infocomm Limited (RJIL), to explore ways to enhance mobile broadband and test cell throughput. These tests will also allow ZTE to make better assessments as to what needs to be done in order to get 5G up and running. Apart from this, ZTE has signed an MoU with BSNL to collaborate on developing pre-5G and 5G wireless systems. ZTE is also in talks with other operators to form similar partnerships, which will be centered primarily on the handling of the network backhaul for the upcoming 5G networks and the creation of customised solutions to best serve each area individually. The company also expects to soon have an end-to-end, full-5G portfolio for India, comprising products for core network virtualisation and wireless networks.

Renewed smartphone strategy

In the past few years, the company has diversified its portfolio by introducing smartphones and tablets. It initially catered to the business-to-business segment, making handsets for operators. In 2013, it entered the consumer market with a slew of phone launches but later went soft on this segment by not offering new products and upgrades.

However, buoyed by the pace at which the Indian smartphone market is growing and in the wake of slowing smartphone sales in China, ZTE has decided to aggressively tap this segment. The company has already launched seven smartphones in 2017 and is planning to further expand its portfolio by the year-end with an aim to achieve a 3-4 per cent share in the smartphone market. Going forward, the company is looking to focus on three smartphone categories: budget smartphones, long battery-life smartphones, and smartphones with dual rear cameras.

The company is also looking to move away from its online-only strategy and expand its offline product line. It is also planning to open exclusive stores in the country in 2018, when it expects to have a wider portfolio of products in place.

Key challenges

The government’s drive to promote indigenous manufacturing is likely to significantly impact ZTE’s business in the country. In a bid to protect the domestic equipment manufacturing industry, the government in April 2016 imposed anti-dumping duty on the import of synchronous digital hierarchy transmission equipment (SDHTE) from Chinese firms including ZTE and Huawei. The government had first come out with an anti-dumping duty of up to 266 per cent on the import of telecom equipment from China in December 2010 for a period of five years. In April 2016, this was extended for a further five years, up to April 2021. In the case of ZTE, an anti-dumping duty of 48.42 per cent has been imposed on the import of SDHTE.

ZTE’s order book is also likely to be affected by the Department of Telecommunications’ directive issued in 2011 mandating domestic operators to source 65 per cent of their annual hardware and network-related equipment from Indian companies by 2020. The Telecom Regulatory Authority of India (TRAI) has also restarted industry consultations on boosting local manufacturing of telecom equipment, which, according to the regulator, has not witnessed the same kind of growth as seen in the handset manufacturing space, despite government incentives. The regulator, in its consultation paper, has opined that apart from economic reasons, the security concerns arising from the excessive reliance on foreign manufactured products also suggest that India should aim at achieving self-sufficiency in telecom equipment manufacturing.  Moreover, the new national telecom policy is likely to include a package to boost domestic equipment manufacturing, which is expected to reduce the dependence on imports and create local jobs.

Meanwhile, in the smartphone segment, ZTE has the challenging task of competing with several other Chinese brands that have already flooded the market with several entry-level and budget smartphones. According to the International Data Corporation, China-based vendors captured 51.4 per cent share of smartphone shipments in India in the quarter ended March 2017 with 16.9 per cent sequential growth and an impressive 142.6 per cent growth over the same period last year. Xiaomi accounted for 14.2 per cent of the total shipments, followed by Vivo (10.5 per cent), the Lenovo Group (9.5 per cent) and Oppo (9.3 per cent). Aggressive advertising campaigns have helped companies like Oppo and Vivo in increasing their shipments as well as market share. While ZTE plans to ramp up its advertising in the next few months, it will not be as aggressive as that of its competitors. Calling itself a technology brand, the company says it believes in giving a product at the right price to a customer instead of taking more money from the customer and spending it on marketing.

ZTE is also likely to face regulatory challenges with the Ministry of Electronics and IT’s recent directive asking ZTE and other Chinese vendors to inform it about the procedures and processes they follow to ensure security. The move follows reports of data leakage and theft. The smartphone-makers have been asked to provide details about the security practices, architecture, frameworks, guidelines and standards followed for providing secure transmission and storage of data. The details have been sought irrespective of whether the companies make their devices in India or import them.


While ZTE has made significant headway in the Indian 5G space, it will be important for the company to sustain the growth momentum. Its ability to do so will go a long way in enabling it to establish a strong presence in the telecom equipment space over the long term. The vendor’s renewed focus on the smartphone market is also well timed as the country is witnessing an increasing demand for data services and smartphones. The majority of data users are looking for entry-level and sub-Rs 10,000 smartphones, which matches ZTE’s price range. However, the road ahead for the company is likely to be challenging given the increased government scrutiny on Chinese vendors and the impetus being provided to domestic equipment manufacturing.


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