Australia’s TPG Telecom Ltd said on Tuesday it has abandoned building its mobile telephone network because it relied on Huawei Technologies Co Ltd equipment that has been banned by Australia’s government on security grounds.
The nascent network is the first commercial casualty in Australia of the ban announced in August and comes as Western nations restrict market access to Huawei over allegations that China could use its equipment for espionage. Huawei denies the allegations.
The world’s biggest telecoms equipment maker has been under siege since the arrest of its chief financial officer, Meng Wanzhou, in Canada in December. The U.S. Justice Department accused the company on Monday of bank fraud and conspiring to steal trade secrets from T-Mobile US Inc.
Broadband internet provider TPG said in a statement it chose Huawei as a supplier because it offered a simple upgrade path from the fourth-generation (4G) network under construction to 5G. “That upgrade path has now been blocked,” TPG said. “It does not make commercial sense to invest further shareholder funds.”
TPG said it made the decision now because the project had reached a point where it would have had to place new orders. It did not elaborate on the fate of the completed part of the network but said it does not expect any impact on 2019 earnings guidance.
Huawei said TPG’s announcement was “extremely disappointing”.
“Australians will now miss out on cheaper and more affordable mobile services,” Jeremy Mitchell, a spokesman for the Chinese firm, said in an emailed statement.
TPG’s move adds to pressure Huawei is facing globally after the United States and its allies initiated measures to restrict market access for the Chinese firm and compatriot ZTE Corp, citing espionage risk.
Australia’s intelligence agencies feared that if mobile operators use Huawei’s equipment, the company could develop a means of collecting data at the request of China’s government – something the company has repeatedly denied.
Operators in Europe such as BT and Orange, have already removed Huawei’s equipment or taken steps to limit its future use while Vodafone has paused its use.
In Australia, Vodafone and Optus, which use Huawei’s 4G equipment must now design 5G systems based only on Nokia Oyj or Ericsson technology, a process TPG Executive Chairman David Teoh said would likely be costly.