Australia’s TPG Telecom Ltd yesterday said it has abandoned building its mobile telephone network because it relied on Huawei Technologies Co (華為) equipment that has been banned by Australia’s government on security grounds.
The nascent network is the first commercial casualty in Australia of the ban announced in August last year, and comes as Western nations restrict market access to Huawei over allegations that China could use its equipment for espionage. Huawei denies the allegations.
Broadband Internet provider TPG said in a statement that it chose Huawei as a supplier because it offered a simple upgrade path from the 4G network under construction to 5G.
“That upgrade path has now been blocked,” TPG said. “It does not make commercial sense to invest further shareholder funds.”
TPG said it made the decision now because the project had reached a point where it would have had to place new orders.
It did not elaborate on the fate of the completed part of the network, but said it does not expect any impact on this year’s earnings.
Huawei called TPG’s announcement “extremely disappointing.”
“Australians will now miss out on cheaper and more affordable mobile services,” Huawei spokesman Jeremy Mitchell said in an e-mailed statement.
TPG shares touched a six-week peak following its announcement and closed up 3 percent.
The cancelation has cost it A$100 million (US$71.63 million), but is widely seen as eliminating duplication under the A$15 billion merger it has agreed with the Australian arm of Britain’s Vodafone Group PLC.
TPG’s announcement also buoyed shares elsewhere in the sector, with those of Telstra Corp Ltd rising 8 percent to a more than three-month high as investors expected relief from profit-margin pressure in the price-competitive sector. The broader market closed down 0.5 percent.
“You take one network out and then, obviously, in the end, for customers you’ve got less choice,” independent telecom analyst Paul Budde said. “This will be a relief for Telstra and others.”
TPG’s move adds to pressure Huawei is facing globally after the US and its allies initiated measures to restrict market access for the Chinese firm and compatriot ZTE Corp (中興), citing espionage risk.
Australia’s intelligence agencies feared that if mobile operators use Huawei’s equipment, the company could develop a means of collecting data at the request of China’s government.
Operators in Europe such as BT and Orang, have already removed Huawei’s equipment or taken steps to limit its future use, while Vodafone has paused its use.
In Australia, Vodafone and Optus, which use Huawei’s 4G equipment, must now design 5G systems based only on Nokia Oyj or Ericsson technology, a process TPG executive chairman David Teoh said would likely be costly.
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