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Huawei losing allies in Europe over growing security concerns

London

THE US has been pushing governments for months to block Huawei Technologies from telecom networks. That strategy is now taking hold in Europe, where the Chinese technology giant is losing allies by the day.

European officials and companies, initially slow to act on the US warnings, last week increasingly distanced themselves publicly from the equipment supplier. The concern is that Beijing could use Huawei's gear for spying - something the company has always denied.

While there have been no outright bans, the outlook is dimming for Huawei in its biggest market outside China. "Reputational damage for Huawei will be significant whatever the outcome," said Neil Campling, telecom, media and technology analyst at Mirabaud Securities Ltd. "It seems likely that Huawei will lose significant share in the next three years."

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In France, Orange SA said last Wednesday that it won't be using Huawei gear to build fifth-generation wireless networks, after BT Group Plc in the UK pledged to rip out some of the company's equipment. In Germany on Thursday, Deutsche Telekom AG raised the prospect of dropping Huawei. Then on Friday, the Norwegian government said it was weighing concerns with using suppliers from countries with which there's no security policy cooperation - an oblique reference to China.

France is pushing for significantly tighter regulation, people with knowledge of President Emmanuel Macron's plans said. The country has safeguards in place for critical parts of its telecom networks and is now considering adding items to its "high alert" list that tacitly targets Huawei, some of the people said.

"It's been a week of negative announcements and indications from the biggest markets in Europe - the UK, Germany and France," said Bengt Nordstrom, CEO of telecom consultant Northstream. The continent's biggest carriers will now be "extra cautious" of buying equipment from Huawei, he added.

Troubles in Europe for Huawei come on top of bans of its equipment in Japan, Australia, New Zealand and the US, and follow the arrest of its chief financial officer Meng Wanzhou, the 46-year-old daughter of founder Ren Zhengfei.

Losing friends in Europe means Huawei risks missing out on orders for networks running into billions of euros. Deutsche Telekom, one of Huawei's biggest European customers, alone plans to invest about 20 billion euros (S$31 billion) in Germany in 5G and other high-speed Internet connections through 2021. Europe, the Middle East and Africa accounts for 27 per cent of Huawei's revenue.

The UK, a member of the Five Eyes intelligence alliance, was the first major market in Europe to publicly raise doubts about the security of Huawei's equipment in the run-up to 5G, last summer. The head of Britain's spy agency MI6 said on Dec 3 that the government needs to decide whether to allow Huawei as a 5G supplier.

France's National Agency for the Security of Information Systems, or Anssi, is demanding full access to potential suppliers' technology. Unlike Nokia Oyj, Cisco Systems Inc and Ericsson AB, Huawei hasn't submitted its equipment for vetting to become certified for critical components and that de facto disqualifies it.

Dropping Huawei in Europe wouldn't be easy. Most carriers have ordered its equipment because the technology is often seen as superior to that of its rivals. And while some analysts have suggested that eliminating Huawei could be a boon for the Scandinavian vendors in particular, there's also a risk of supply-chain disruptions if the biggest player is taken out. BLOOMBERG