SA telecoms may become a casualty in US-China tech war

Vodafone - Vodacom's majority shareholder - last week said it was halting business with Huawei

03 February 2019 - 00:17 By MUDIWA GAVAZA

US-China trade tensions continue to rattle global markets, with the US campaign against Chinese technology giant Huawei being seen as the latest proxy fight in the war. This is now affecting SA's telecommunications sector, which relies heavily on equipment from the Chinese.
This week, US authorities brought formal charges against Huawei - the largest suppliers of networking equipment globally and second-largest smartphone maker after Samsung - accusing it of stealing trade secrets and violating sanctions against Iran.
Huawei said in a statement: "The company denies that it or its subsidiary or affiliates have committed any of the asserted violations of US law set forth in each of the indictments . and believes the US courts will ultimately reach the same conclusion."
The potential impact of the dispute between China and the US could have a knock-on effect for South African ICT companies, some of which are already reviewing their relationship with Huawei.
Taahir Joosub, a trader at Unum Capital, said: "Huawei installs roughly 70% of the 4G network infrastructure in Africa."
After the US government's ban in 2018 of Huawei devices, citing potential spying by the Chinese government through the devices, countries such as New Zealand and Australia have also issued bans against the tech company.
Closer to home, UK-based Vodafone - Vodacom's majority shareholder - last week said it was halting business with Huawei, pending the outcome of investigations.

Huawei says it has a 20-year track record of doing business in Africa. "We've had no security breaches here or in the rest of the world to date. SA is a key market for Huawei, we are focused on increasing connectivity," the company said.
A Vodacom spokesperson said: "Against the backdrop of heightened political noise in Europe and wanting to make sure the industry is engaging in a fact-based discussion around this issue, Vodafone has decided to pause any new deployment of Huawei's 5G equipment in its 'core' in Europe."
The MTN Group, Africa's largest mobile operator, which also operates in Iran and Syria, said it "notes the recent developments concerning Huawei as reported in the media. Huawei has been a valued partner to MTN Group for many years.
"MTN is monitoring this matter and will continue to operate in the very best interest of all our stakeholders, across our markets."
The US's global campaign against Huawei has infuriated China, with negotiations continuing as the trade truce draws to an end in a month's time. The market fears this could worsen relations and threaten global economic co-operation.
Huawei is said to be at the forefront of developing technology for the next generation of internet access - 5G - which is set to underpin driverless cars in the future and the Internet of Things.
Some in the market speculate that the US has ostracised Huawei as a way to give its own companies time to catch up in advancing their own technology.
"The US clearly wants its operators to be at the forefront so it can dominate on a global scale. It therefore has a motive to go after Huawei," said Ruhan du Plessis, a technology analyst at Avior Capital Markets, though he admitted Huawei may have loyalties to the Chinese government.
"Huawei is also currently holding trials for 5G roll-out with MTN and Vodacom," said Joosub, adding that it was in the best interests of ICT companies that wanted to keep up with the times to continue doing business with Huawei.
As African and other emerging-market governments increasingly partner with the Chinese on projects, analysts believe Huawei's business will not suffer in these markets.
Huawei said it has secured 30 commercial contracts for 5G networks and has already shipped more than 25,000 base stations to markets around the world at present - up from 25 contracts and 10,000 base stations in December.
Joosub said Huawei as a supplier was ultimately beneficial for the telecommunications consumer.
"Operators need to keep focused on cutting costs, given the capital-intensive nature of the industry and the ongoing drive to reduce prices.
"It is well noted in the networking equipment market that Huawei proposes a very competitively priced product."..

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