China's Huawei faces new setbacks in Europe's telecom market

The US dispute with China over a ban on tech giant Huawei is spilling over to Europe, the company’s biggest foreign market, where some countries are also starting to shun its network systems over data security concerns.

Some European governments and telecom companies are following the US’s lead in questioning whether using Huawei for vital infrastructure for mobile networks could leave them exposed to snooping by the Chinese government.

Bans in Europe could significantly increase the financial pressures on Huawei.

“Europe is still divided over Huawei, but the trendline is moving in a fairly clear direction” as the US exerts pressure on allies to block it, said Thorsten Benner, director of the Berlin-based Global Public Policy Institute think tank.

Geopolitical tensions over Huawei intensified after its chief financial officer, who is also the daughter of founder Ren Zhengfei, was arrested December 1 in Canada in connection with US accusations that the company violated restrictions on sales of American technology to Iran.

Huawei has been blocked in the US since 2012, when a House Intelligence Committee report found it was a security risk and recommended that the government and private companies stop buying its network equipment.

Germany’s Deutsche Telekom said last week it “takes the global discussion about the security of network elements from Chinese manufacturers very seriously”. The company said it uses multiple companies to build its network, including Ericsson, Nokia and Cisco.

“Nevertheless, we are currently reevaluating our procurement strategy,” it said.

The statement is significant because until recently it had been one of Huawei's ‘biggest cheerleaders’ based on its cheap and reliable equipment, said Benner.