The shock arrest of Huawei Technologies Co (華為) chief financial officer Meng Wanzhou (孟晚舟) comes at a crunch time in Europe, as governments decide whether to crack down on the Chinese technology giant.
Before Canadian officials detained Meng on Dec. 1 over potential contravention of US sanctions on Iran, officials from Britain, Germany and France were becoming increasingly wary of the telecom equipment maker, people familiar with the matter said.
Amid concerns of an escalating US-China trade dispute, Washington has been bringing allies onside over its long-standing fears that Huawei’s equipment could enable Chinese spying.
While Australia and New Zealand in the past few months barred Huawei’s equipment from next-generation telephone networks, Europe has yet to take decisive action.
Europe, where 5G networks are to be rolled out starting next year, is a key battleground for Huawei as its largest market outside Asia, where the company has spent more than a decade notching up contracts with the likes of Deutsche Telekom and Vodafone Group.
“Companies are making their decisions about their core network technology,” technology analyst CCS Insight chief of research Ben Wood said. “Those are decisions which are implemented and then sustained for a decade, so this is a very, very important crossroads for Huawei and these kind of moves are very unhelpful, the fact that this has all blown up at this time.”
In Britain, Huawei has come under increased government scrutiny since a cybersecurity oversight board in July said that it could no longer guarantee the company’s equipment does not compromise national security.
British telecom BT Group has begun to remove Huawei gear from the core of the EE mobile network it acquired two years ago and this week Huawei agreed to demands from British security officials to address risks in its software and equipment as it tries to avoid getting banned as a 5G supplier, a person familiar with the matter said on Friday last week.
Germany’s coalition government also has concerns about letting Huawei supply 5G equipment, people familiar with the matter said.
Officials are looking at potential changes to rules or standards that would affect Huawei, although it is controversial within government, said the people, who asked not to be identified as the deliberations were private.
A representative for the German Federal Ministry for Economic Affairs and Energy declined to comment.
One German lawmaker, who attended a recent briefing by US officials advocating against Huawei, said that any action on the matter should wait until after the nation’s 5G airwaves auction finishes next year and the licenses have been awarded.
Germany currently has no legal basis to partially or fully exclude Huawei from supplying 5G equipment.
“Germany and the EU should not jump on [US President Donald] Trump’s campaign against China,” said Katharina Droge, a Green lawmaker responsible for trade. “Nevertheless, it is in Germany’s own interest to take the concerns about Chinese technology very seriously.”
In France, government departments are rethinking the nation’s relationship with Huawei, people familiar with the matter said.
Earlier this year, French Secretary of State for Digital Affairs Mounir Mahjoubi said that telecoms should work with European equipment makers.
The risk for Huawei might be greater in Britain, where the head of the British Secret Intelligence Service on Monday said that the government must decide if Huawei should be barred from running 5G networks.
The government is conducting a review into the resilience of its supply chains that could lead to recommendations affecting Huawei.
“We reject any suggestion that we might pose a threat to national security,” a Huawei spokeswoman said in an e-mailed statement. “Cybersecurity should not be politicized and equipment vendors should not be treated differently based on country of origin.”
Espionage concerns have long swirled around the company, run by a former military engineer. Huawei has always maintained that it is independent and does not give the Chinese government access to its equipment.
It has mounted slick lobbying campaigns to assuage political leaders in Europe and opened its operations to monitoring in markets such as Britain.
With equipment seen by telecom executives as superior to that of Nokia and Ericsson, Huawei has managed to topple its European rivals to become the largest mobile equipment supplier on the continent.
The coming of 5G technology, which allows speeds fast enough to download a full-length movie in seconds and a range of new products and services, has security and government officials concerned that core networks could be more at risk of being hacked.
Telecoms in Europe already split their equipment supply between the three major suppliers and could shift more of their business to the non-Chinese vendors over time, UBS analyst Tejas Venkatesh wrote in a note on Thursday last week.
BT is putting pressure on Huawei to address Britain’s concerns, through its role on the board led by the British Government Communications Headquarters intelligence agency, which oversees the company’s activities, said telecom industry executives, who spoke on condition on anonymity.
A representative for BT declined to comment.
Three UK, a unit of Hong Kong billionaire Li Ka-Shing’s (李嘉誠) CK Hutchison Holdings, has signed key 5G equipment supply contracts with Huawei and Nokia.
The telecom on Thursday last week said that it is monitoring the situation closely, but has no concerns about partnering with Huawei.
Telefonica Deutschland continues to see Huawei as an important business partner, company spokesman Cornelius Rahn said.
“This arrest is no reason to question that relationship,” he said.
Additional reporting by Kitty Donaldson, Brian Parkin, Stefan Nicola, Angelina Rascouet and Marie Mawad.
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