Huawei finds allies among European telecom companies despite US security warnings

US warnings that Huawei poses a security risk and should be avoided in the rollout of high-speed Internet networks have so far failed to convince European telecom companies to abandon the Chinese company.

Leading European operators such as Deutsche Telekom, Vodafone, Telecom Italia and Proximus have been trusting Huawei to build out 4G networks, and aren’t likely to exclude it for 5G infrastructure, which will usher in ultra-high-speed mobile networks for Internet-connected devices.

This may come as a disappointment to the US, which has recently urged its allies to rule out Huawei for critical telecom infrastructure. One of its main concerns is that Chinese companies such as Huawei and ZTE are compelled under a 2017 law to comply with the government's intelligence demands.

While the US, Australia and New Zealand — three members of the “five eyes” intelligence-sharing group — have taken steps that ban Chinese suppliers from 5G contracts, European allies and telecom companies have been less cautious. In a blow to US demands, the UK has indicated it could mitigate the risks of using Huawei equipment in 5G networks, according to press reports.

European companies’ response to the US campaign against Huawei can be seen in the light of two important factors: improving their finances and weighing security risks.

A recurring problem for European telecom companies is that many are facing shrinking revenues as increased competition is forcing down prices. Bidding for 5G licenses, which has started with hefty prices in Italy, and then building the network will cost billions of euros.

When they launch tenders for 5G gear starting this year, they will be reluctant to exclude Huawei — which has invested heavily in the technology and is often cheaper, thanks to state support, than rivals such as Ericsson and Nokia.

— Naivety? —

While there’s a strong business case for using Huawei, European companies aren’t naive. They have a clear-eyed view of the potential security risks. They have done their due diligence and have experience with the Chinese company. There has been no evidence that Huawei equipment has been used in espionage or security breaches to date.

European telecom operators are also obliged to follow the EU’s Network and Information Systems Directive, which spells out requirements for protecting critical infrastructure. While no network is 100 percent secure, the UK government has years of experience vetting Huawei.

Deutsche Telekom puts a strong emphasis on having multiple vendors, including Ericsson, Nokia, Cisco Systems and Huawei. “Nevertheless we are currently re-evaluating our procurement strategy,” a spokesperson told MLex.

In the UK, which has been home to Huawei since the 2000s, the company has been subject to strict rules that include giving access to its engineering process through a Cyber Security Evaluation Centre.

Huawei has also consistently denied claims against the company, allegations that its chief representative to the EU, Abraham Liu, recently described as “ungrounded and senseless.”.

Liu said that the company’s devices “have never caused any serious cybersecurity breaches in Europe,” and that partners in Europe have publicly affirmed their trust in it.

When asked about Huawei and potential security risks, Belgium’s Proximus said it has a “good relationship with Huawei and is not aware of any material elements that point to a specific threat.”

— Additional legislation —

The security questions could lead to new EU cybersecurity regulations if national governments ask the European Commission to put forward a proposal, the bloc’s digital commissioner Andrus Ansip pledged earlier this month.

Although part of Europe’s network security is protected via the NIS-Directive, electronic communication rules and the Cybersecurity Act, EU countries have diverging rules on both certification and procurement of telecom products.

When asked if more rules are indeed necessary to address these gaps, national administrations including those of the Netherlands and the UK say that they are making their own assessment of whether safety concerns require additional measures.

The Dutch are in the process of putting forward a law against “unwanted control in telecommunication” which aims at reducing national security risks for its telecoms services. The proposal was first initiated in 2014 to address third party access to the domestic market, but could possibly restrict the emerging Chinese operators, too.

— US approach —

Since Huawei is so successful in Europe and hasn’t been blamed for any security problems, one could wonder why the US is taking such a hard line against the company. The US, after all, wouldn't benefit from the company being shut out of the European market because it doesn't host any companies that are directly involved in making 5G equipment.

The answer could be that Huawei is in the unfortunate position of being a pawn in the US-China trade war. The US could be looking for more leverage during trade talks with China, which were originally meant to wrap up by the end of this month, but are likely to be extended.

The US has threatened to impose tariffs of 25 percent against $200 billion worth of Chinese imports unless China agrees to open its market to US goods, curb onerous investment criteria, and take steps to prevent the theft of US intellectual property.

The US pressure could be seen as a pure bargaining chip in the high-stakes trade talks. The EU, which is far more dependent on Huawei for its network infrastructure, is loath to cut them out of the future of 5G without any concrete proof of security risks.

Europe is now the company’s second-largest market outside of China with 12,000 employees working on the continent. In a 5G trial in Milan — led by Vodafone with 28 partners and 10 public entities — half of the 300 sites will be provided by Huawei.

With that kind of footprint in Europe, US pleas to abandon Huawei will most likely fall on deaf ears.

*Additional reporting by James Pressley.