U.K. Opens Talks With Huawei Rival as Johnson Confronts China

(Bloomberg) -- The U.K. is in talks with a rival to Huawei Technologies Co. as Boris Johnson's officials revise the British government's stance toward China in the wake of the global coronavirus pandemic.

Officials spoke with Japanese technology company NEC Corp. in May as part of efforts to diversify the range of equipment providers for the U.K.'s fifth-generation mobile networks, a person familiar with the matter said. The government is also looking at Samsung Electronics Co Ltd as a possible option to provide crucial 5G infrastructure, the person said.

The aim is to move the country away from reliance on Huawei, in the face of growing political opposition within Britain's ruling Conservative Party and wariness toward China among the U.K.'s international allies.

Johnson gave the Shenzhen-based telecommunications giant the green light to supply parts of the 5G networks in January, a move that angered U.S. President Donald Trump who had called for the company to be banned.

But the prime minister and his close team have become far more skeptical of China since the Covid 19 crisis hit the U.K., as have others in his party. Tories, including officials in the administration, have been critical of Beijing over China's handling of the initial stages of the coronavirus outbreak.

Tory Revolt

Government officials now believe it will be impossible to stop a revolt from Tory members of Parliament blocking Huawei's involvement in 5G mobile networks when the government brings forward legislation later this year, people familiar with the matter said.

The political reality of opposition to Huawei has made it urgent for Johnson's ministers to push ahead with finding alternative providers so the country does not need to rely on Huawei for 5G systems in the longer term, the people said.

Huawei equipment currently makes up about a third of Britain's 4G mobile broadband antennas, and rules introduced in January meant it would be able to supply up to 35% of those for 5G, as well as full fiber broadband.

Officials have been ordered to draw up plans to phase out the Chinese company's involvement in U.K. 5G networks by 2023. But no single company can currently step in to replace Huawei entirely, which is why the government is looking to a range of companies to diversify the supply chain and end reliance on a handful of mobile network providers.

The discussions between the government and NEC focused on bringing the company into the U.K.'s 5G market, at first potentially through a trial program to develop technical capabilities, called “5G Create.” A person familiar with the matter said the move showed the government is serious about diversifying the market and moving away from reliance on Huawei.

More Talks

Samsung, which currently has no 5G equipment in U.K. moble networks, will be invited in for talks with the government soon as part of the wider bid to diversify the network supply chain, the person said.

The Department for Digital, Culture, Media and Sport is leading the work as part of a 200 million pound ($252 million) 5G trials program to develop the U.K.'s mobile network infrastructure. The company declined to comment.

“NEC are currently involved in various 5G activities in different parts of the world but we are not able to comment on this specific project,” a spokesperson for NEC said in an email.

U.S. officials have urged allies to ban Huawei from 5G networks on security grounds, arguing that its equipment could be used by Chinese spies, something the company has always denied.

U.K. digital security officials are reviewing the role of Huawei in light of the U.S. government's recent additional sanctions on the company, which could have a significant impact on British networks. “The security and resilience of our networks is of paramount importance,” a government spokesperson said.

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At the same time, Johnson's team is responding to a broader shift in the West's stance toward China.

Political tensions have grown in the wake of the covid-19 pandemic. China's plan to introduce a new security law in Hong Kong, a former British colony, has also provoked dismay in London.

Johnson has called on Beijing to back down but warned he'll give as many as 3 million people the chance to seek refuge in the U.K. if the new security law is imposed on Hong Kong.