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Reliance Communications has agreed to buy network equipment valued up to $600 million from Huawei and ZTE after the two Chinese vendors helped the telecom operator secure loan from various Chinese banks.
RCom had earlier announced an agreement with Export Import Bank of China, China Development Bank and Industrial and Commercial Bank of China for a loan of $1.18 billion. The loan will be used by RCom to repay its Foreign Currency Bonds (FCCBs) that are maturing in March. The loan, which has a seven-year maturity, bears 5 per cent rate of interest, according to an internal Government note prepared by the Research & Analysis Wing (RAW) seen by Business Line .
The RAW note reveals that the loan was secured with help from the two Chinese equipment vendors. “The built-in structure of the loan agreement has not been made public so far. It is, however, learnt that the actual loan is $925 million. Influential Chinese telecom equipment makers Huawei Technologies and ZTE Corporation are understood to have helped RCom to secure loans from the State-owned Chinese banks as RCom is to buy $600 million worth of telecom gear from them,” the note marked secret stated.
It added that Huawei Technologies is known to have links with the People's Liberation Army, an allegation the Chinese company has repeatedly denied. RCom declined to comment, but sources in the know said that the deal to buy Chinese gear is subject to the two vendors matching market pricing and quality standards.
‘Indianisation' by vendors
The note has been sent to the Prime Minister's Office, Ministry of Finance and the Cabinet Secretariat for further action. The RAW note said that the two Chinese vendors have launched an aggressive ‘Indianisation' drive to change their public perception. “Huawei Technologies has recently decided to appoint an Indian as the Chairman of it's wholly–owned subsidiary in India and has taken some Indians on the Board of Directors. ZTE also plans to revamp its five-member board in India,” the document said. Security agencies have been raising concerns about buying gear from Chinese vendors. The Department of Telecom has, therefore, put in place security guidelines for importing equipment from all foreign players. A number of other telecom companies, including Airtel, Tata Teleservices and Idea Cellular have also bought equipment from the two Chinese vendors based on these guidelines.
For Anil Ambani Group this is not the first time it has secured loans in return for buying equipment from Chinese vendors. Reliance Power had earlier signed a deal with Shanghai Electric to buy power equipment, which in turn helped the company to secure loans.
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