LONDON—Washington’s campaign to get some of its closest European allies to give up telecommunications gear made by Chinese companies has been a tough sell.
European countries have been listening to the U.S. closely and will make the ultimate decision on whether or not to allow Huawei Technologies Co. and ZTECorp. in domestic networks. But feedback from Europe’s biggest cellular and internet providers is complicating that decision. Executives from those providers, especially in Britain, have warned that they would end up bearing the cost of a potential ban on equipment.
These executives say that Huawei offers superior hardware, often at lower prices, so a ban could mean Europe falls behind Asian and other countries that use Huawei in the rollout of 5G, the coming superfast wireless technology.
A total ban “would have significant financial cost, would have significant customer disruption and would delay 5G rollout in several countries,” said Nick Read, chief executive of Vodafone Group PLC on a Jan. 25 conference call. Britain’s four major wireless carriers— Vodafone, BT Group PLC, TelefonicaS.A.’s O2 and CK Hutchison Holdings Ltd.’s Three—have both privately and publicly cautioned against a ban, according to people familiar with the matter.
Smaller carriers also prefer Chinese equipment. Jersey Telecom, a government-owned carrier serving the isle of Jersey, a British dependency in the English Channel, solicited multimillion-dollar bids from both Chinese and Western companies in 2014. It needed equipment to build its current wireless network. Huawei’s bid was 20% off the lowest Western offer, while ZTE was 40% cheaper, said Jersey Telecom Chief Executive Graeme Millar. He went with ZTE.
“I have a genuinely high-class, low-cost supplier with ZTE, who haven’t let me down yet,” Mr. Millar said.
U.S. leaders say the Chinese government could order Huawei and ZTE employees to use knowledge of how their equipment works to spy or disrupt communications. Both companies say that would never happen. After essentially banning Chinese telecom manufacturers in the U.S., Washington turned its attention overseas late last year.
The chief executive of a major Italian wireless carrier was summoned last fall to the U.S. embassy in Rome, where diplomats and intelligence officers asked his company to stop using Huawei, without sharing evidence, a person familiar with the meeting said. The carrier continued to use Huawei gear, the person said, adding that “there is no replacement to Huawei in the market.” A spokeswoman for the U.S. embassy in Rome declined to comment on private meetings.
A State Department official said the U.S. is focused on lobbying governments in European countries, rather than governments in developing areas, because Europe closer to launching 5G, the speedy wireless technology that could enable self-driving cars, factory parts and everyday objects to be internet-connected, and therefore potentially hacked. Washington is targeting Huawei, the world’s top telecom-equipment maker, because it is much bigger than ZTE.
Allied governments have taken notice. German officials, after voicing skepticism about American worries over Huawei, have since reversed course, saying they too were considering a Huawei ban.
In Britain, the government plans to complete a formal review of its telecom supply chain by this spring. Its main aim is to decide whether Britain is overly reliant on Huawei equipment, according to people familiar with the review.
British wireless executives say Huawei can release some 5G technology up to a year ahead of their Western rivals. In addition, some carriers have already signed 5G contracts with Huawei. A senior executive at one carrier said a Huawei ban could delay its 5G launch by 18 months. The company would need months to solicit bids from alternative suppliers, test that equipment, and then wait longer for Sweden’s Ericsson AB and Finland’s Nokia Corp. , Huawei’s only major non-Chinese rivals, to release comparable final products, the executive said.
Outside North America, the Chinese company outpaces its Nordic rivals.Share of regional cellular-equipment market revenue, Ericsson and Nokia say their recent sales prove they both make competitive equipment. In 2017, Huawei led the European cellular-equipment market with 31% of revenue, according to research firm Dell’Oro Group. Ericsson had 29% and Nokia had 21%.
In their review, British officials are weighing both national-security concerns and economic ones, such as the possibility that the country’s tech sector and manufacturing industry could be slowed if it doesn’t have access to Huawei equipment. U.K. officials have also raised security concerns about poorly designed software in Huawei equipment, an issue the Chinese company said could take up to five years to fix.
British and American officials share the concern that Huawei and ZTE could put Western competitors out of business and be the only option for telecom equipment in the future, according to people familiar with the matter.
The U.S. unveiled sweeping charges against Chinese tech firm Huawei on Jan. 28, 2019. WSJ’s Shelby Holliday breaks down the indictments.
Unlike U.S. officials, who favor a total Huawei ban, their U.K. counterparts are considering whether to allow some Huawei equipment with limited access to the core network that transfers most calls and data, according to people familiar with the matter. That would essentially be only cellular antennas and the electronics that sit next to them, which represent roughly half the cost of the equipment needed for a 5G upgrade, telecom executives say.
British telecom executives have written off having Huawei equipment in core networks, but are arguing for letting it remain in cellular-tower equipment. They say someone would need to physically visit a cellular tower to hack it, and could compromise data from only devices connected to that tower. Each major British carriers could have more than 10,000 of such sites across the country.
European countries have been listening to the U.S. closely and will make the ultimate decision on whether or not to allow Huawei Technologies Co. and ZTECorp. in domestic networks. But feedback from Europe’s biggest cellular and internet providers is complicating that decision. Executives from those providers, especially in Britain, have warned that they would end up bearing the cost of a potential ban on equipment.
These executives say that Huawei offers superior hardware, often at lower prices, so a ban could mean Europe falls behind Asian and other countries that use Huawei in the rollout of 5G, the coming superfast wireless technology.
A total ban “would have significant financial cost, would have significant customer disruption and would delay 5G rollout in several countries,” said Nick Read, chief executive of Vodafone Group PLC on a Jan. 25 conference call. Britain’s four major wireless carriers— Vodafone, BT Group PLC, TelefonicaS.A.’s O2 and CK Hutchison Holdings Ltd.’s Three—have both privately and publicly cautioned against a ban, according to people familiar with the matter.
Smaller carriers also prefer Chinese equipment. Jersey Telecom, a government-owned carrier serving the isle of Jersey, a British dependency in the English Channel, solicited multimillion-dollar bids from both Chinese and Western companies in 2014. It needed equipment to build its current wireless network. Huawei’s bid was 20% off the lowest Western offer, while ZTE was 40% cheaper, said Jersey Telecom Chief Executive Graeme Millar. He went with ZTE.
“I have a genuinely high-class, low-cost supplier with ZTE, who haven’t let me down yet,” Mr. Millar said.
U.S. leaders say the Chinese government could order Huawei and ZTE employees to use knowledge of how their equipment works to spy or disrupt communications. Both companies say that would never happen. After essentially banning Chinese telecom manufacturers in the U.S., Washington turned its attention overseas late last year.
The chief executive of a major Italian wireless carrier was summoned last fall to the U.S. embassy in Rome, where diplomats and intelligence officers asked his company to stop using Huawei, without sharing evidence, a person familiar with the meeting said. The carrier continued to use Huawei gear, the person said, adding that “there is no replacement to Huawei in the market.” A spokeswoman for the U.S. embassy in Rome declined to comment on private meetings.
A State Department official said the U.S. is focused on lobbying governments in European countries, rather than governments in developing areas, because Europe closer to launching 5G, the speedy wireless technology that could enable self-driving cars, factory parts and everyday objects to be internet-connected, and therefore potentially hacked. Washington is targeting Huawei, the world’s top telecom-equipment maker, because it is much bigger than ZTE.
Allied governments have taken notice. German officials, after voicing skepticism about American worries over Huawei, have since reversed course, saying they too were considering a Huawei ban.
In Britain, the government plans to complete a formal review of its telecom supply chain by this spring. Its main aim is to decide whether Britain is overly reliant on Huawei equipment, according to people familiar with the review.
British wireless executives say Huawei can release some 5G technology up to a year ahead of their Western rivals. In addition, some carriers have already signed 5G contracts with Huawei. A senior executive at one carrier said a Huawei ban could delay its 5G launch by 18 months. The company would need months to solicit bids from alternative suppliers, test that equipment, and then wait longer for Sweden’s Ericsson AB and Finland’s Nokia Corp. , Huawei’s only major non-Chinese rivals, to release comparable final products, the executive said.
Outside North America, the Chinese company outpaces its Nordic rivals.Share of regional cellular-equipment market revenue, Ericsson and Nokia say their recent sales prove they both make competitive equipment. In 2017, Huawei led the European cellular-equipment market with 31% of revenue, according to research firm Dell’Oro Group. Ericsson had 29% and Nokia had 21%.
In their review, British officials are weighing both national-security concerns and economic ones, such as the possibility that the country’s tech sector and manufacturing industry could be slowed if it doesn’t have access to Huawei equipment. U.K. officials have also raised security concerns about poorly designed software in Huawei equipment, an issue the Chinese company said could take up to five years to fix.
British and American officials share the concern that Huawei and ZTE could put Western competitors out of business and be the only option for telecom equipment in the future, according to people familiar with the matter.
The U.S. unveiled sweeping charges against Chinese tech firm Huawei on Jan. 28, 2019. WSJ’s Shelby Holliday breaks down the indictments.
Unlike U.S. officials, who favor a total Huawei ban, their U.K. counterparts are considering whether to allow some Huawei equipment with limited access to the core network that transfers most calls and data, according to people familiar with the matter. That would essentially be only cellular antennas and the electronics that sit next to them, which represent roughly half the cost of the equipment needed for a 5G upgrade, telecom executives say.
British telecom executives have written off having Huawei equipment in core networks, but are arguing for letting it remain in cellular-tower equipment. They say someone would need to physically visit a cellular tower to hack it, and could compromise data from only devices connected to that tower. Each major British carriers could have more than 10,000 of such sites across the country.
