Huawei Spy Case Sets Up a New Warsaw Pact

(Bloomberg Opinion) -- Poland just handed the U.S. a gift in its case against Chinese telecom-equipment giant Huawei Technologies Co.

Yet this development won't halt Huawei's global advance. Rather it will deepen the global split between those who trust the company and those who don't.

On Friday, Polish authorities said they arrested a Huawei employee and a former Polish security agent, accusing both of spying for China. Authorities also pointed out that the case was against two individuals, not the company itself.

Huawei promptly fired the staff member and has been consistent in its denial of espionage allegations.

U.S. lawmakers are among those making the point that even if Huawei doesn't want to engage in espionage, it operates at the behest of the Chinese government. Huawei gets 51 percent of its revenue from China, where telcos are government-controlled.

The deepening cleavage between Huawei proponents and detractors means the company will likely strengthen its focus on the business at hand — selling smartphones and communications equipment.

With many developed markets effectively closed to Huawei, and China already in the bag, the company is looking elsewhere. Developing Europe, Africa and Asia are lush pastures.

The Middle East and Africa, for example, are home to 1.3 billion mobile connections — almost equal to the population of China. Latin America and Eastern Europe combined provide the same amount, according to data compiled by Bloomberg Intelligence.

The Chinese company's smartphones have surpassed 15 percent share in Saudi Arabia, the United Arab Emirates, Mexico, Colombia and South Africa, Huawei said in its 2017 annual report. Ethiopia, Nigeria, Kenya and Namibia are among nations on its client list for telecommunications equipment, while Middle East markets account for five of at least 22 commercial 5G contracts Huawei has signed to date.

Some of these are places that could benefit from Chinese foreign aid, or at the very least might be unable to resist it. Markets, that if not for Beijing's generosity, might not have been able to afford miles of new highways, big expensive shipping ports, or high-speed communications networks.

With Huawei determined to push forward alongside Beijing's broader globalization effort, it's likely this Polish case will further split the world into Chinese and U.S. hemispheres. This could leave some in the middle left to decide on which side they want to live.

And it makes Warsaw once again the unwilling center of a global divide.

To contact the editor responsible for this story: Rachel Rosenthal at rrosenthal21@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.