How the LatAm telecom industry sees the US-Huawei row

While having blacklisted Huawei on grounds of national security risks, Donald Trump told reporters he believes the company could be a bargaining chip in trade talks with China.

In saying as much, Trump weakens his administration’s argument that Huawei’s equipment facilitates espionage and unlawful data usage by the Chinese government.

Commercially motivated or security-driven, the fact is that a good part of the telecom industry in Latin America wants this issue off the agenda. Elsewhere, Vodafone, Softbank, Kddi, Panasonicand ARM joined Google, Qualcommand Intel, among others, in cutting ties with Huawei.

At the Painel Telebrasil telcos summit held this week in Brasília, big telecom groups in Latin America asked the government not to meddle in the political and trade row between Washington and Beijing. Leave the market to decide for itself when it comes to Huawei and to telecom suppliers, they say. Just about all operators in Brazil are supplied by Huawei.

The head of América Móvil in Brazil, José Felix, recalled his company’s use of key network equipment from Huawei, along with Nokia's and Ericsson's, for radio solutions for 2G, 3G and 4G technologies.

“It’d be hell if the government meddled in that and banned a supplier from the market,” Felix said.

Brazilian telco Oi, which is in bankruptcy protection, would certainly feel the burden. The Rio de Janeiro-based company has been involved in 5G tests with the Chinese supplier.

For Oi the situation is all the more delicate because the company needs to accelerate investments to catch up with rivals and remain competitive – which means it cannot simply shrug off a provider like Huawei.

"Oi is in a very big struggle and needs all suppliers," its CEO Eurico Teles told the summit. "We don’t think there should be a political decision on this issue, even more so considering the investments already made in Huawei’s equipment. Technology has no country.”

Pietro Labriola, CEO of Telecom Italia-controlled TIM, emphasized that Huawei is a “very relevant supplier in South America.” TIM just announced 5G tests in the 3.5GHz frequency in three Brazilian cities, the first of which are being conducted with Huawei.

Nevertheless, Labriola stressed that TIM does not have a position on the industrial policy discussions involving the US and Chinese governments.

Telefônica Brasil also told BNamericas that the operator does not have an official position on the Huawei issue. 

For its part, local telecoms watchdog Anatel is aligned with the carriers.

Anatel board member Aníbal Diniz said Brazil needs all players if it wants to "become competitive" and is “not in a position to say which one can or cannot operate in the local market.”

Cesar Mattos, the competition and competitiveness secretary at Brazil’s economy ministry, told BNamericas that the US-Huawei conflict is currently not being debated within the Brazilian ministry. 

Speaking at a panel during the conference, Mattos said: “An eventual decision [on Huawei] has to be, as far as possible, eminently economic, taking into account lower costs and higher quality [of networks].”

Eventually, Brazil and other Latin American markets with good relations with the US could be pressured by the Trump administration to clamp down on Huawei. Ultimately, Trump could enforce sanctions indirectly by banning companies that do business with Huawei.

Huawei said it has received no indication from the Brazilian government as to any restrictions on its equipment. The company remains confident that the controversy will not affect its Latin American operations – at least for now.

"I don’t see signs in that direction, on the contrary. The signs are good. We work with virtually all carriers in Brazil, we work with banks at the corporate level and we’re now launching smartphones for local consumers. The scenario is very positive for us," said the head of integrated solutions at Huawei Brasil, Carlos Roseiro.

CHIPMAKERS

On a global level, however, things are starting to get tough for Huawei.

Following the executive order signed by Trump, US chipmakers Intel and Qualcomm announced the suspension of purchase orders with the Chinese group until further notice.

Cristiano Amon, the Brazilian-born executive who leads Qualcomm Technologies, argued in Brasília that his company had no choice. “It wasn’t an option. We had to comply with the order,” he said.

Nonetheless, Amon admitted that the decision will hurt the chipmaker – Huawei is the world’s second largest handset company in devices shipped – although Qualcomm can ramp up sales to other major clients to offset such losses.

Finland’s Nokia, a potential beneficiary of Huawei’s troubles, adopted a more diplomatic tone when asked about a potential ban of its rival.

Luiz Tonisi, head of the company in Brazil, said: "This issue is in a sphere that we don’t control. But there is something that we do control. And that is, whatever happens, we'll continue to be here. Without any doubt, we will continue to operate here.”