We won't bid for 'core' 5G business, Huawei NZ exec says

Huawei won't bid for the "core" element of Spark, Vodafone and 2degrees' respective 5G mobile network upgrades, the Chinese company's NZ deputy chief executive Andrew Bowater says. Photo / Supplied

Huawei won't bid for Spark, Vodafone and 2degrees' "core" 5G mobile network upgrade business, the company's NZ deputy chief executive Andrew Bowater tells the Herald.

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The stance will make life a lot easier for the government as it mulls whether to block the Chinese technology company from mobile network upgrades - as has already happened across the Tasman, with security concerns cited.

In broad terms, the core is the "brain" of a mobile network. Bowater says because it is "aware of sensitivities" and "frankly, it's not worth the hassle", Huawei will restrict itself to bidding for RAN (radio access network) elements of Spark, Vodafone and 2degrees' respective mobile upgrades - that is, transmitting and receiving gear on cellphone towers.

With Huawei not pushing to be part of the 5G core, it will be harder for its foes to push a security threat argument.

Bowater strongly denies his company poses any security threat. He says there are no examples of Huawei compromising national security, despite the company being under more scrutiny than any other.

He notes that under the Telecommunications (Interception Capability and Security) Act 2013, the GCSB has to approve technology used by network operators for telecommunications network upgrades. Huawei faced similar scrutiny by the GCHQ in the UK, which shared results with New Zealand. It has passed.

If the government were to block Huawei from bidding for 5G contracts, consumers would ultimately pay the price, Bowater said.

"If there are only three players in the market, it will naturally reduce competition."

Our three main telcos all want to upgrade their mobile networks from 4G (fourth-generation) to faster 5G technology.

But two things have to happen first. A spectrum auction has to take place, and Communications Minister Kris Faafoi and GCSB Minister Andrew Little have to make a final decision on whether any technology suppliers will be banned from making bids. Both say the jury is still out.

Both will be mindful of that fact that any Huawei ban would be a lot more costly here than across the Tasman.

In Australia, Huawei was also blocked from the National Broadband Network (NBN), the equivalent to our public-private Ultrafast Broadband (UFB) rollout and international cable projects.

Here, former Prime Minister John Key actively promoted Huawei as a cost-competitive option for our telcos back in 2010 as the UFB build was about to kick off.

Banning Huawei from 5G builds would imply the company was also a security threat for all of our telco network infrastructure. Ripping out its gear would cost hundreds of millions.

Bowater says Huawei has around 150 staff in NZ.

The company supplies landline and mobile network technology to 2degrees, landline technology to Vodafone and mobile technology to Spark.

Huawei was also a key technology partner for Chorus on the Rural Broadband Initiative, and supplied Ultrafast Broadband (UFF) and Enable Networks for their legs of the UFB.

All up, Huawei's gear is in around one-third of New Zealand's telecommunications infrastructure, Bowater says.

The Huawei executive says he appreciates Kiwi politicians have been "pragmatic", following a process-based approach and the GCSB's formal review under TCSA.

Some Australian politicians had taken a more "sensationalist" approach, Bowater said, basing decisions on more political factors. In the US, there have been suspicions that some of the anti-Chinese "snooping" sentiment is driven by protectionism.

He also notes that a two other "Five Eyes" countries, the UK and Canada, have vetted and approved Huawei gear.

Spark MD Simon Moutter says Huawei should allowed to bid for 5G business unless the government provides "incontrovertable proof" the Chinese company poses a security threat. Photo / Dean Purcell

At his company's annual meeting this morning, Spark managing director Simon Moutter went in to bat for Huawei, telling shareholders he expected the Chinese company to be able to bid for his business unless the government provided "incontrovertible proof" it posed a security threat.

IDC senior research manager Shane Minogue says it's "difficult to say" whether our government should follow Australia in banning Huawei.

"The NZ government has to do its own due diligence to determine if there is a security risk in allowing Huawei to build 5G," Minogue says.

"Australia and the US have decided to exclude Huawei from supplying 5G equipment so NZ needs to investigate and determine if there is a risk. When you look internationally there are countries and telcos that are investing strongly with Huawei - for example, South Koreas SK Telecom and Spain's Telefonica - and those that aren't. So NZ needs to conduct its own investigation to determine the best course of action."

IDC senior research manager Shane Minogue says it's "difficult to say" whether our government should follow Australia in banning Huawei. Photo / Supplied.

Minogue adds, "Huawei has already invested large sums in NZ and is a competitive provider [in terms of pricing] with excellent technology so any decision to ban them will have ramifications on competition in New Zealand network pricing and have follow-on impacts on the NZ consumer. With that in mind, any decision should not be taken lightly or without proper reason."

Telecommunications Users Association chief executive Craig Young says, "I can't see why we would follow Aussie on any technology decisions. The removal of one of the competitive vendors from the market may lead to increased costs by the providers and thereby increased costs for users."

He adds, "Given that two of our UFB built networks are using Huawei technology, it would be a huge disruption to the UFB project, as well as a significant cost."