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New problems for the warring Huawei in France and Germany

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

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

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.

Huawei says that the 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 he considered the safety concerns to be 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 given the debate about the safety of the Chinese network gear in Germany and the other European markets where it is active.

“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, Nokia, Cisco and Huawei. “Nevertheless, we are reassessing our purchasing strategy,” he said.

The shift is of interest, because, so far, 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.

Almost half of the German company, the revenue, however, comes from its profitable and fast-growing U.S. unit T-Mobile, which is undergoing regulatory scrutiny of the $26 billion bid to take over Sprint Corp.

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 licences 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 in Germany, the Number 3 of the operator’s existing relationships with Huawei and ZTE, another Chinese supplier.

United Internet, 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.

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

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.

“For that reason, there are many suppliers would be reluctant to do without Huawei.”

Additional reporting by Gwenaelle Barzic and Nadine Schimroszik; Editing by Gopakumar Warrier and Keith Weir

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