Table of Contents

You may also like:

EU Wrestles With Huawei Issue While UK Debates Continue

EU wrestles with Huawei issue while UK debates continue

The UK’s pending verdict on whether to use equipment made by the Chinese telecommunications giant, Huawei, to establish its 5G mobile networks couldn’t come at a more critical period. Meanwhile, in the Eurozone, governments are weighing up the pros and cons of basing the 5G network on Huawei technology.

The Chancellor of Germany, Angela Merkel, has expressed her inclination towards treating all suppliers of telecommunications equipment the same. This has not been received well by members of her party who are supportive of President Trump’s decision to blacklist Huawei unconditionally.

As Britain and the EU engage in lengthy talks to try and set out the terms of a future trade relationship after Brexit, many government officials around the bloc are concerned that giving Huawei permission to supply crucial equipment for the 5G mobile networks poses a threat to national security.

The Eurozone’s major telecommunications companies all use Huawei products and are now campaigning against blacklisting the Chinese telecoms giant.

Having said this, Europe’s top telecom operators have started to eject Huawei from the center of their networks. The mainframe of their networks is a far more delicate area than the external radio network that Huawei wants to supply its equipment for.

So, let’s have a quick look at what has happened so far.

German response

Throughout Germany, legislators across the board are battling Mrs. Merkel’s stance on the issue. German lawmakers support the view coming from Washington that Huawei, as a company, poses a serious threat to national security because of its connection to the government in China. Huawei has and continues to reject all accusations of wrongdoing.

The German Chancellor has requested that Huawei debates are postponed ahead of the EU summit scheduled for March, highlighting a rumor that has been circulating the bloc that governments are considering delaying the launch of the new 5G network until all risks have been considered.

Germany’s automotive sector has voiced its fears that blacklisting the Chinese telecoms company carries with it the possibility that Beijing could retaliate by restricting trade through increased tariffs. China is Germany’s main export market, meaning that any negative changes to the trade relationship could damage economic growth.

What are the implications?

Some of Europe’s main telecoms operators include the likes of Vodafone, Deutsche Telekom, and Telefonica, and they all use Huawei products. The common warning coming from these firms is that if Huawei is banned outright, the cost of replacing the existing equipment could exceed a billion euros.

The Eurozone has become a focal point in the technology trade war between Beijing and the US. Nokia and Ericsson, Huawei’s main European rivals, could become the bloc’s number one equipment vendor if the Chinese firm is banned.

According to Dell’Oro Group’s Jimmy Yu, Huawei holds a ‘28 percent share of the telecom equipment market, increasing its market share by 4 percentage points since 2015.’

Other important conclusions from Mr. Yu’s article include:

  • ‘The overall telecom equipment market declined 2 percent year-over-year for the 1Q 2018 through 3Q18 period. Robust demand for Optical Transport and Microwave Transmission equipment was not enough to offset declining Core and Service Provider Router revenues.’
  • ‘Huawei’s revenue share continued to improve in 2018—up around four percentage points between 2015 and the first nine months of 2018. During this period, Ericsson’s and Nokia’s market share declined one and three percentage points, respectively.’
  • ‘Huawei’s telecom equipment revenue is nearly as large as Nokia and Ericsson combined.’
  • ‘Huawei’s revenue share gains over the past four years have been most pronounced in the Core, Router, and Optical Transport Markets.’

Nokia has a 16 percent share of the telecoms equipment market followed closely by Ericsson with a 13 percent share. Huawei is blacklisted in the US.

What is the toolbox?

The prospective toolbox, set to be released this week, aims to establish a framework for the sole purpose of assessing the integrity of network security. However, this initiative could only make suggestions as European laws specify that security policy is strictly a matter for European governments and parliament only.

Thierry Breton, the European Commissioner for Internal Market and Services said that Europe would act independently as a sovereign state when it comes to deciding on how the 5G network will be supplied and built.

“Europe holds half of all the patents in the world when it comes to 5G whereas China holds around 30 percent and the U.S. 14 percent,” wrote Mr. Breton. “5G is a highly decentralized network, which exponentially increases the surface of risk … We need to take these risks seriously, responsibly, without any naivety. Europe can count on its own suppliers of 5G technologies.”

Quotation sourced from politico.eu

Are there any exceptions?

France’s leading network operator, Orange, is owned in part by the state. The domestic network in France does not use Huawei.

Bouygues Telecom and Altice Europe’s SFR are competitors to the French market leader, and Huawei clients, which raises questions as to what could happen when France attempts to sell its 5G spectrum.

Uncertainty and hesitation

Despite the turmoil and ongoing debates, eurozone governments have not yet blacklisted Huawei. Perceptions of Huawei vary across the EU with some parties fearful and skeptical whereas others are notably supportive of the Chinese company. Hungary and Spain are amongst the few countries that welcome Huawei as they cannot find any evidence that would reinforce Washington’s accusations that Huawei could be used to steal intellectual property.

On the other hand, the cyber-security auditor in the Czech Republic has warned all major network firms that it has uncovered some security risks in certain Huawei equipment. Holland and Italy have suggested that they could introduce retroactive measures to reject Huawei if it is found to be a security risk.

The EU seems somewhat hesitant to blacklist Huawei altogether. Are EU governments waiting for the uncertainty that surrounds Brexit and the US-China trade war to clear before they make their decision on whether to use Huawei equipment for its 5G networks?

Important Notice!

As of 1 February 2020, “EuropeFX” is no longer a Corporate Authorised Representative (“CAR”) of Union Standard International Group Pty Ltd (“USG”), which holds an Australian Financial Services License (“AFSL”) # 302792.

As of 1 February 2020, “EuropeFX” is no longer a Corporate Authorised Representative (“CAR”) of Union Standard International Group Pty Ltd (“USG”), which holds an Australian Financial Services License (“AFSL”) # 302792.

Moving forward all of your trading services (as stipulated in the Terms of Business, FSG and PDS) will be provided to you directly by USG with exactly same business terms and user experience.

As the issuer of the CFD financial products and responsible financial services licensee, USG has been providing the underlying trading services which were made available to you through the EuropeFX platform. There will be no interruption or change to your trading experience.

All of your trading history, and all open position will remain open and will be reflected also in your new client area when you login on or after 1 February 2020. The only difference moving forward will be that all customer support and inquiries after 31 January 2020 will be provided by representatives of USG rather than EuropeFX.

As of the 1 February 2020, please contact UGS’s support team via email to [email protected] or via telephone: +61 2 9251 1416.

We thank you for your support and business to date, and wish you all the best for continued trading success.