Deutsche Telekom reviews Huawei network supply from China

Deutsche Telekom said on Friday it was reviewing its network vendor strategy in light of a debate on the security of Chinese network equipment.
Deutsche Telekom network EuropeChina-based Huawei is the world’s largest telecom equipment maker, while ZTE is the fourth largest.

German state owns a stake of nearly a third in Deutsche Telekom, Europe’s largest telecoms company.

Deutsche Telekom is reviewing its technology vendors because some U.S. allies excluded Chinese equipment maker Huawei from their existing 4G network and future 5G network on national security grounds.

Capex including spectrum investment of Deutsche Telekom fell from 16.5 billion euros to 9.4 billion euros in Q3 2018. The substantial decrease in Capex was due to 7.3 billion euros spent on mobile spectrum by T-Mobile US.

Any review on telecom network suppliers from China will be a big blow on both Huawei and ZTE because Europe is one of the largest telecom network markets in the world. Most of the mobile operators in Europe are gearing up for 5G launches in 2019 and 2020.

“Deutsche Telekom takes the global discussion about the security of network equipment from Chinese vendors very seriously,” the company told Reuters.

Deutsche Telekom already pursues a multi-vendor strategy, relying above all on equipment from Ericsson, Nokia, Cisco and Huawei. “Nevertheless we are reassessing our procurement strategy,” Deutsche Telekom said.

U.S. officials have briefed allies in recent months that Huawei is ultimately at the beck and call of the Chinese state, while also warning that its network equipment may contain “back doors” that open them up to cyber espionage. Huawei denies this.

Countries such as the US, Australia and New Zealand and telecom operator BT from UK will not using 5G network equipment from Huawei. Japan is also considering a similar move.

Deutsche Telekom and Huawei are conducting a pilot project in Berlin ahead of the auction of German 5G licenses in 2019.

Deutsche Telekom earlier said it generated revenues of 5.441 billion euros (–0.9 percent) in Germany, 9.227 billion euros (+9 percent) in the US, 3.045 billion euros (+3.4 percent) in Europe and 1.754 billion euros (+2.8 percent) from enterprise business.

Nearly half of the German company’s revenues come, however, from its profitable and fast-growing U.S. unit T-Mobile, which is undergoing regulatory scrutiny of its $26 billion bid to take over Sprint Corp.

Meanwhile, Deutsche Telekom today said it will equip Center Connected Industry (CCI) at RWTH Aachen with a Campus Network – powered by 5G network. Deutsche Telekom will build a dual slice campus network combining public and private LTE at the RWTH Aachen site. The campus network will provide indoor coverage to the factory buildings, as well as outdoor coverage on the CCI site.