Deutsche Telekom puts 5G network deal on hold

Deutsche Telekom has put all deals to buy 5G network equipment on hold as it awaits the resolution of a debate in Germany over whether to bar Chinese vendor Huawei on security grounds, Reuters reported.
Deutsche Telekom network Europe

Europe’s largest telco finds itself in a tight spot after senior lawmakers in Chancellor Angela Merkel’s coalition rebelled and called for a ban on Huawei, which is a key vendor for its existing mobile networks in Germany and Europe, Reuters reported.

At the same time in the United States, a $26 billion deal for Deutsche Telekom’s T-Mobile unit to merge with Sprint hangs in the balance. More than a dozen U.S. states have sued to block the merger and a New York judge will hear the case on Dec. 9.

Washington imposed an export ban on Huawei in May and called on allies to follow suit, alleging the global network market leader’s gear was insecure and that it was beholden to Beijing – concerns highlighted by President Donald Trump on Wednesday at a NATO summit in England.

While Huawei has denied the U.S. allegations, any sign that Deutsche Telekom is doing fresh business with the Chinese company risks undermining the U.S. deal’s chances of getting over the finishing line.

Deutsche Telekom board member Claudia Nemat recently met Huawei Deputy Chairman Eric Xu for talks on the business relationship between the two companies.

Angela Merkel had backed a proposed regulatory framework that would not impose blanket bans on any one provider but instead subject the technology and governance of all vendors to scrutiny.

Angela Merkel has estimated that Huawei accounts for 70 percent of Germany’s existing mobile networks, a share that she expects to fall in future, to the benefit of European competitors Nokia and Ericsson.

Senior lawmakers in Merkel’s Christian Democratic Union have objected, however, pushing through a resolution at a recent party conference to add some form of parliamentary scrutiny to the oversight regime.

Merkel’s junior coalition allies, the Social Democrats, have also backed calls for a tougher regime. Foreign Minister Heiko Maas is now proposing legislation to create a “politically legitimated body” to oversee 5G security, news weekly Die Zeit reported on Wednesday.

Deutsche Telekom has already launched 5G in a handful of German cities, with its rollout in Berlin based on a pilot project there with Huawei. It plans to expand coverage to 20 cities next year, while warning of the impact of holdups.

“We hope that we will get political clarity for Germany’s 5G buildout as soon as possible, so that we do not fall behind,” Deutsche Telekom said.