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- U.S. says Chinese technology opens backdoor to spies
- ‘If the Americans have evidence, please put it out’: Vodafone
Last summer, the Trump administration started a campaign to convince its European allies to bar China’s
from their telecom networks. Bolstered by the success of similar efforts in Australia and New Zealand, the White House sent envoys to European capitals with warnings that Huawei’s gear would open a backdoor for Chinese spies. The U.S. even threatened to cut off intelligence sharing if Europe ignored its advice.
So far, not a single European country has banned Huawei.
“There are two things I don’t believe in,” German Chancellor Angela Merkel said at a conference Tuesday in Berlin. “First, to discuss these very sensitive security questions publicly, and second, to exclude a company simply because it’s from a certain country.’’
Europe, caught in the middle of the U.S.-China trade war, has sought to balance concerns about growing Chinese influence with a desire to increase business with the region’s second-biggest trading partner. With no ban in the works, Huawei is in the running for contracts to build 5G phone networks, the ultra-fast wireless technology Europe’s leaders hope will fuel the growth of a data-based economy.
The U.K.’s spy chief has indicated that a ban on Huawei is unlikely, citing a lack of viable alternatives to upgrade British telecom networks. Italy’s government has the U.S. warnings as it seeks to boost trade with China. In Germany, authorities have proposed tighter security rules for data networks rather than outlawing Huawei. France is doing the same after initially flirting with the idea of restrictions on Huawei.
“The 5G rollout is one of the most complex and expensive technology projects ever undertaken,” said Paul Triolo, an analyst at Eurasia Group, a political risk consultancy. “The challenge for Europe is to find a way that minimizes the security risks linked to Chinese suppliers but not delay 5G, which is so important to the region.”
Governments listened to phone companies such as Vodafone Group Plc, Deutsche Telekom AG, and Orange SA, who warned that sidelining Huawei would delay the implementation of 5G by years and add billions of euros in cost.
“We’ve not seen any evidence of backdoors into the network,” said Helen Lamprell, Vodafone’s top lawyer and chief lobbyist in the U.K. “If the Americans have evidence, please put it out on the table.”
The pressure has been building for months. The U.S. in February dispatched representatives to MWC Barcelona, the industry’s top annual trade show, who urged executives and politicians to avoid Huawei and its Chinese peers. And this month, the U.S. ambassador in Berlin wrote a letter to the German government saying it should drop Huawei or risk throttling U.S. intelligence sharing.
While carriers can also buy equipment from the likes of Ericsson AB, Nokia Oyj, and Samsung Electronics Co., industry consultants say Huawei’s quality is high, and the company last year filed 5,405 global patents, more than double the filings by Ericsson and Nokia combined. And some European lawmakers have been wary of Cisco Systems Inc., Huawei’s American rival, since Edward Snowden leaked documents revealing the National Security Agency’s use of U.S.-made telecom equipment for spying.
Pulling Ahead
Between 2013 and 2018, Huawei increased its telecom market share by 8 percentage points
Source: Dell'Oro 2018 market share
Huawei isn’t necessarily safe. In Germany, hard-liners in the intelligence community say the company isn’t trustworthy, and updated security rules the government is drafting could make it harder for Huawei to win contracts. Denmark’s biggest phone company, TDC A/S, declined to renew a contract with Huawei and instead picked Ericsson as strategic partner to develop its 5G network. Across Europe, the Shenzhen-based company is under pressure to allow greater scrutiny of its technology and increase assurances its equipment can’t be accessed by Chinese spies.
Huawei has “placed cyber security and user privacy protection at the very top of its priorities,” a company representative said by email. Safeguarding networks is the joint responsibility of vendors, telecom companies, and regulators, he said.
So far, there’s little evidence to suggest Europe will shun Huawei. National railway companies in Germany and Austria have bought the company’s equipment, and carriers such as Deutsche Telekom and Telefonica are running 5G test projects with its products.
Huawei’s global revenue growth accelerated in the first two months of the year, climbing by more than a third, founder Ren Zhengfei said last week. And the company says sales of its smartphones doubled in Germany during the same period.
“We don’t know what the U.S.’s next move is, so it’s not over yet,” said Bengt Nordstrom, CEO of telecom consultancy Northstream. “But whatever market share Huawei may lose in Europe, they’ll win back in China.”
— With assistance by Thomas Seal, Helene Fouquet, Nick Wadhams, Daniele Lepido, and Kitty Donaldson
