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Deutsche Telekom reviews Huawei ties; Orange says not be on 5G

FRANKFURT/PARIS (Reuters) – Huawei [HWT.UL] faces, new challenges in Europe after Germany’s Deutsche Telekom (DTEGn.DE) announced that the rate of the supplier strategy and Orange (ORAN.PA said that it would not hire Chinese company to build the next generation of the network in France.

FILE PHOTO: The logo of German telecommunications giant Deutsche Telekom AG is seen at the company’s headquarters in Bonn February 25, 2016. REUTERS/Wolfgang rattay

The shift of the national market leaders, partly in the hands of the state, follows the Huawei exclusion on national security grounds by some AMERICAN allies, led by Australia, of the building of their fifth-generation (5G) mobile networks.

AMERICAN officials have informed allies that Huawei is ultimately up to the suggestions of the Chinese state, while warning that the network equipment could contain “back doors” that would take them to cyber espionage.

The Deutsche Telekom review comes as U.S. regulators investigate the proposed $26 billion acquisition by T-Mobile US (TMUS.O -) – unit of Sprint Corp (S. N), which is controlled by japan’s Softbank (9434.T).

Softbank, which days of the listing of the wireless device in Tokyo, plans to replace its 4G network equipment from Huawei, Nikkei has reported.

Huawei says that the safety concerns are unfounded. The tensions are increased by the arrest of Huawei’s chief financial officer in Canada for possible extradition to the United States.

“We don’t have feature to make a call on Huawei for 5G,” Orange CEO Stephane Richard told reporters in Paris. “We are working with our traditional partners – they Ericsson and Nokia.”

Richard said the safety concerns were legitimate: “I absolutely understand that all of our countries, and the French authorities, will be confiscated. We are too.”

Responding, Huawei said that it is not a supplier of Orange existing 4G network in France and would not be in the company’s 5G plans in France. Huawei produces Orange networks outside France and are expected to be involved in 5G, said.

AMERICAN EXPOSURE

Deutsche Telekom, Europe’s largest telecom company, said that the rate of its supplier plans in Germany and the other European markets where it is active, given the debate about the safety of the Chinese network gear.

“Deutsche Telekom is taking the global discussion about the safety of the equipment in the network of the Chinese suppliers very seriously,” the company said in a response to a Reuters query.

Telekom already carries a multi-vendor strategy, rely primarily on the equipment of Ericsson (ERICb.ST), Nokia (NOKIA.HE), Cisco (CSCO.O) and Huawei. “Nevertheless, we are reassessing our purchasing strategy,” he said.

The shift is of interest, because, German officials have said that they have no legal basis to exclude any vendors from the buildout of the fifth-generation networks in response to the warnings from Washington.

Economy Minister Peter Altmaier, in an interview with Reuters on Friday confirmed that the attitude when asked about the prospect of Huawei building 5G networks in Germany.

“There are no worries about individual companies,” Altmaier said in Berlin. “But each product, each device must be safe when it comes to be used in Germany.”

Almost half of the German company, the revenue, but the fast-growing U.S. unit T-Mobile, which hopes to win U.S. approval to take over Sprint in a deal that would lead to a close challenger of leading duo Verizon (VZ.N) and AT&T (T. N).

A source at one rival said: “This looks like an appeasement strategy in the direction of the AMERICAN government about the Sprint deal.”

Other German telecom players say, in the meantime, continue the conversations with the Chinese suppliers as they draw up proposals to take part in the German auction of 5G licenses in the beginning of 2019.

“We look at the discussion on the foot, but we will not participate in the current speculation,” said Telefonica Deutschland (O2Dn.DE), Germany is the Number 3 of the operator’s existing relationships with Huawei and ZTE (000063.SZ), a Chinese supplier.

United Internet (UTDI.DE), a potential entrant that roads offer for a 5G license, said it was in talks with two suppliers on its strategy – one of which is Chinese. A spokesman refused to identify the seller, but according to reports in the media, it is ZTE.

People walk past a Huawei store in Beijing, China, December 11, 2018. REUTERS/Thomas Peter

Analysts say that the German telecom operators are heavily dependent on Huawei, which means that it will be difficult to demolish and replace the existing gear or to go without the Chinese company, the world’s top network provider, in the building of their 5G networks.

“If the Chinese companies are excluded, this would reduce the number of suppliers – and that would result in higher costs,” said Hans Schotten, Technical University in Kaiserslautern.

“That is the reason that many companies would be reluctant to do without Huawei.”

Additional reporting by Gwenaelle Barzic, Paul Carrel, Gernot Heller and Nadine Schimroszik; Editing by Gopakumar Warrier, Keith Weir and Kirsten Donovan

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