Financial Times (11.15.10)

Huawei confident of US plans

By Stephanie Kirchgaessner

Huawei executives said they were confident that the Chinese telecommunications equipment company would eventually make huge strides in the US market, even though security concerns have persistently frustrated the company’s momentum there.

The Chinese group has recently met with objections in Washington to talks over a potential equipment deal with Sprint Nextel, the US telecommunications carrier.

In an interview with the Financial Times, Charlie Chen, Huawei’s senior vice-president for marketing in the US, said free market principles ensured that the group would work with a major US carrier, a goal that has remained elusive.

“It may take a long time. It may take three or five or 10 years, it doesn’t matter, we’ll get there,” he said.

Huawei said it had not officially been notified by Sprint whether speculation in Washington that the Chinese company was no longer in contention for a major equipment contract because of US security concerns was accurate.

Sprint declined to comment on the status of the deliberations, but according to an official in President Obama’s administration, Dan Hesse, the company’s chief executive, was approached by Gary Locke, commerce secretary, this month about the government’s concerns about a potential deal between Huawei and Sprint.

Losing out on a major equipment bid would represent the last in a series of defeats for the company, which in effect was blocked from acquiring 3Com in 2007 and this year lost bids for a unit of Motorola and a company called TwoWire. People familiar with the deals said concerns about the political fall-out of the transactions and security concerns in Washington played a role in each.

Bill Plummer, a Washington-based Huawei executive, insisted that US security agencies were chiefly concerned by cybersecurity issues in general and not about Huawei specifically.

“The interdependence of the supply chain is just now beginning to be understood in this town,” Mr Plummer said, pointing to the fact that even US companies are manufacturing all of their equipment in China and other countries.

But that view is not necessarily shared by security officials. One person close to the Sprint talks said the fact that other equipment makers also manufacture products in China would not help US officials overcome their resistance to Huawei because there was a lack of trust about the company’s intentions.

In the face of another potential upset, Huawei said US customers were the ultimate losers.

“We have no visibility into Sprint’s decision making process, if some non-commercial factor comes into play it is really truly to the detriment of competition in the US, and US jobs and US livelihood,” said Mr Plummer.