Telus, Bell Huawei Snub Shows Impact of US Sanctions, Backlash Against Chinese Regime

June 3, 2020 Updated: June 3, 2020

News Analysis

Amid the growing backlash against the Chinese regime and U.S. sanctions increasingly crippling Huawei, it’s little wonder that Canadian telecom giants Telus Corp. and BCE Inc. decided to partner with the rivals of the Beijing-linked Huawei for their 5G networks.

BCE, the parent company of Bell, announced on June 2 that it is partnering with Ericsson for its 5G network, and Telus followed with a similar announcement hours later that it’s partnering with Ericsson and Nokia.

“Huawei has clearly failed to establish its credentials as a private company, as a trustworthy partner, or as being above illicit financial schemes across the world’s conflicts and developing countries,” says Shuvaloy Majumdar, a Munk senior fellow with the Macdonald-Laurier Institute.

A recent Angus Reid survey showed that only 14 percent of Canadians think Huawei should be allowed to participate in the country’s 5G networks. Ottawa has yet to make a decision on whether to allow the company to be part of Canada’s 5G infrastructure.

Canada’s allies are also increasingly pushing to have Huawei excluded from 5G networks. The United States has threatened its partners, including Canada, that it would limit data sharing if they allow Huawei to participate. And last week, British media reported that the U.K. is looking to form a 10-member coalition with G7 nations and other countries to secure 5G supplier alternatives to Huawei. There has been increasing backlash against Beijing in the U.K. over the regime’s handling of the COVID-19 outbreak.

“With the U.K. looking at an alternative 5G community of major market countries, it is not surprising that 5G alternatives from Nokia and Ericsson are featuring more prominently,” says Majumdar.

Rogers was first among Canada’s three telecom giants to announce it won’t be using Huawei for its 5G network. The company’s vice-chair told Bloomberg last year that Huawei is a threat to Canada and should be barred from 5G networks.

But Telus had earlier indicated that it would be partnering with Huawei on 5G, despite uncertainty as to whether the federal government would give Huawei the green light.

For Telus and BCE, the decision to go with Huawei’s rivals was a business one, says Christian Leuprecht, a political science professor at Queen’s University and the Royal Military College of Canada.

“If you look at the business uncertainty when it comes to China, the business risk has increased substantially,” Leuprecht says.

The situation for Huawei has been exacerbated by sanctions imposed by the Trump administration. The latest blow is the administration’s move to block chip suppliers from selling semiconductors produced using U.S. technology to Huawei.

“This has a huge impact,” Leuprecht says, adding that it has affected the business calculus for telecom companies wanting to use Huawei.

Leuprecht says the decision by the Canadian telecoms can have a cascading effect, as the telecom companies around the world are in dialogue with one another.

Shattered Credibility

With Huawei increasingly isolated, its credibility is further undermined if it can’t be part of the 5G networks in democratic countries.

“If the only people you’re involved with are autocrats, that’s not really good for business,” Leuprecht says.

One of the things that sets Huawei apart from its competitors is that the company, founded by a former officer of China’s People’s Liberation Army, is willing to do business with anyone who is willing to pay, Leuprecht says.

“As much as this [access to the Canadian market] was a market share and geopolitical share for China, it was also an opportunity for Huawei to increase its credibility, and it doesn’t have much.”

All these developments point to the fact that the U.S. strategy to make business increasingly difficult for Huawei has worked, he says.

“That’s the U.S. calculus. If you create a market environment that’s so inhospitable to Huawei it will change the business calculus, and that seems to be what’s happening,” Leuprecht explains.

“It was ingenious because it put enough pressure on allies while raising the security issue, and also used some very targeted trade sanctions that’s causing massive pain.”