An Australian telecommunications and information technology company has become the latest to sever its ties with China-headquartered telco Huawei.
TPG Telecom blamed its decision on Huawei’s failed bid to supply mobile equipment for Australia’s new 5G cellular network. The Australian government banned the China-based telco and its rival ZTE from participating in the network altogether due to security concerns back in August 2018.
After careful consideration and realising that Huawei’s ban was beyond its control, TPG announced that it is ending the A$2 billion ($1.43 billion) rollout of its Huawei-equipped 5G mobile network.
The Australian telco said it had tried to find other ways to design and implement its 5G mobile network that is mainly based on small cell architecture since the Huawei ban in August 2018. TPG had selected Huawei to supply the principal equipment for its network because of the “simple upgrade path to 5G, using Huawei equipment.”
But the company says that after investigating other options, it “does not make commercial sense to invest further shareholder funds (beyond that which is already committed) in a network that cannot be upgraded to 5G.”
“It is extremely disappointing that the clear strategy the company had to become a mobile network operator at the forefront of 5G has been undone by factors outside of TPG’s control,” TPG Executive Chairman David Teoh said in a statement to the Australian Securities Exchange. “Over the past two years a huge amount of time and resources has been invested in creating and delivering on a strategy that would have positioned TPG very favourably to exploit the opportunities that the advent of 5G will present.”
Teoh had told Fairfax in September 2018 that given there were “not many suppliers in the marketplace,” the ban of Huawei had “puts pressure on prices.”
Wang Shuangyi, Chinese economist with the Institute of Chinese Economy and Culture Study, wrote in a December 2018 article that Huawei has only been able to beat its competition on pricing as it “copied, plagiarized, and stole” technology from foreign entities, and pushed “foreigner suppliers out of China.”
Huawei then used their profits from the Chinese market and different types of subsidies from China to “exercise active domination in overseas markets,” Wang said, calling Huawei a “Ponzi scheme” of the Chinese Communist Party (CCP).
TPG has already invested about A$100 million ($71.59 million) in its 5G network rollout and purchased equipment for 1,500 sites prior to the Australian government ban. The company has already finished implementing a little over 900 small cell sites to date.
TPG, which plans to merge with Vodafone Hutchison Australia in an A$15 billion ($10.74 billion) deal, says it will continue to roll out the equipment it had already ordered from Huawei prior to the government’s ban. But it appears the company will halt the ordering of any more equipment from Huawei.
TPG and Vodafone also spent A$263 million ($188.28 million) to buy its share in the country’s 5G spectrum in the 3.6 GHz band at a December 2018 auction, and had already committed an additional A$30 million ($21.47 million) on construction costs.
The board of TPG has said it is not ready to announce its decision on the future strategy for the company’s current spectrum holdings. All the options available will be carefully considered and the market will be updated once a decision is reached, TPG said, according to the statement.
“While TPG remains committed to the planned merger with Vodafone Hutchison Australia, the company must continue to make independent business decisions in the best interests of TPG shareholders pending the outcome of the merger process,” Teoh said.
Although the Australian government never specifically mentioned which communications companies would be affected, Huawei was informed by the government that it was included in the banned as a supplier likely to be subject to the “extrajudicial directions from a foreign government that conflict with Australian law,” which would leave Australia vulnerable to “unauthorised access or interference.”
Huawei Australia said the ban was an “extremely disappointing result for consumers” in a Twitter post dated Aug. 23, 2018. “We have been informed by the govt that Huawei and ZTE have been banned from providing 5G technology to Australia,” the post read.
We have been informed by the Govt that Huawei & ZTE have been banned from providing 5G technology to Australia. This is a extremely disappointing result for consumers. Huawei is a world leader in 5G. Has safely & securely delivered wireless technology in Aust for close to 15 yrs
— Huawei Australia (@HuaweiOZ) August 22, 2018
John Lord, chairman of Huawei Australia, believes banning Huawei will “not make the Australian telecom ecosystem safer.” However, the company’s extensive lobbying has done nothing to ease concerns over the risk of spying by the CCP.
According to an statement from Aug. 23, Ministers for Communications Mitch Fifield said that given that 5G requires “significantly different” network architecture to previous mobile generations, it provides a way to “circumvent traditional security controls by exploiting equipment in the edge of the network—exploitation which may affect overall network integrity and availability, as well as the confidentiality of customer data.”
Huawei has been subject to similar restrictions in other countries including the United States, which criminally charged the telco on Jan. 28 for stealing trade secrets, defrauding banks, obstructing justice, and violating trade sanctions against Iran.
In a 13-count indictment, the U.S. Department of Justice accused Huawei, Huawei’s chief financial officer Meng Wanzhou, and two Huawei subsidiaries—Huawei USA and a Hong Kong firm named Skycom Tech—of misleading a global bank and U.S. authorities about the nature of their business relations under which business was conducted in Iran.
In a separate 10-count indictment, U.S. prosecutors accused Huawei of stealing trade secrets, committing wire fraud, and obstructing justice for allegedly stealing robotic technology from T-Mobile to test smartphone durability.
“Both sets of charges expose Huawei’s brazen and persistent actions to exploit American companies and financial institutions and threaten the free and fair global marketplace,” FBI Director Christopher Wray said at a press conference in Washington, on Jan. 28. “Huawei and its senior executives repeatedly refused to respect U.S. law and standard international business practices.”
Additional reporting by Epoch Times reporter Cathy He.