SGAPY Singapore Telecommunications Limited (PK)

By Robb M. Stewart 

MELBOURNE, Australia--An Australian company's plan to build a US$1 billion mobile telecoms network has collapsed after Canberra blocked use of equipment made by China's Huawei Technologies Co. on national security grounds.

TPG Telecom Ltd.'s decision to abandon the mobile rollout after investing about 100 million Australian dollars (US$71.8 million) in early work illustrates how increasing government scrutiny of Huawei is stoking uncertainty among businesses, many of whom had favored Huawei for its competitive prices and customer service. TPG had hoped to become Australia's fourth mobile operator in a market that includes units of Vodafone Group and Singapore Telecommunications Ltd.

Wireless carriers around the world are preparing to spend billions on hardware for 5G, the coming generation of superfast wireless technology, to replace current 4G networks.

In 2017, TPG outlined its ambition to challenge Australia's incumbent mobile telecoms operators with its own network in response to the shift by consumers to mobile devices and competition from other companies reselling capacity on the government-built National Broadband Network. The fiber network is the core of TPG's fixed-line telecommunications business.

TPG wanted Huawei to be its main equipment provider because the Chinese company's gear offered a simple path to upgrade to a next-generation 5G network. It had already bought and installed some Huawei equipment when Canberra joined the U.S. in restricting the Chinese company's sales because of national-security concerns.

"In light of the government's announcement in late August 2018 that it would prohibit the use of Huawei equipment in 5G networks, that upgrade path has now been blocked," TPG said on Tuesday.

A Huawei spokesperson wasn't immediately available for comment. Huawei has said it is employee-owned and not beholden to Beijing or any government. It says its equipment poses no more threat than any other supplier, because of the industry's reliance on common suppliers with major Chinese operations.

TPG's move comes just days after Vodafone, the world's biggest mobile carrier outside China, said it is temporarily halting purchases of some components made by Huawei. Another major British carrier, BT Group PLC, said late last year it was replacing Huawei gear with competitors' in its network cores.

TPG said it had looked for ways to overcome the problem created by the Huawei ban, but was unsuccessful. "It does not make commercial sense to invest further shareholder funds (beyond that which is already committed) in a network that cannot be upgraded to 5G," the company said.

Australia is part of the so-called Five Eyes alliance that shares intelligence, which also includes the U.S., U.K. and Canada. The U.S. has long labeled Huawei a national-security threat. Officials say they worry Beijing could compel the company or its employees to use its gear and know-how to spy or disable foreign systems.

In a pair of cases unsealed Monday, U.S. federal prosecutors accused Huawei of violating U.S. sanctions on Iran and of stealing trade secrets from a U.S. business partner, portraying the company as flouting U.S. laws while trying to do business in the country.

U.S. lawmakers have accused Huawei of spying and criticized it over suspected links to the Chinese government and the People's Liberation Army. American officials have launched a global campaign to persuade the country's allies to shun Huawei.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

January 28, 2019 18:51 ET (23:51 GMT)

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