Huawei and ZTE blasted by U.S. Congress report - Top Turkeys 2012


There were signs dating back to 2010 that Huawei was trying to lobby for an expanded presence in the U.S. infrastructure market and that U.S. lawmakers had concerns about that. Huawei and fellow Chinese vendor ZTE were dealt a major blow in late 2010 when it was reported that Sprint Nextel (NYSE:S) decided to block them from getting its multibillion-dollar Network Vision network modernization project because of mounting national security concerns.

In February 2011 Huawei invited the U.S. government to open an investigation into any security concerns it may have in a bid to knock down what it deemed unsubstantiated claims that it poses a threat to U.S. national security. Both Huawei and ZTE have long denied they have any connection to the Chinese military or government or pose a national security.

Yet the concerns never seemed to go away. In October 2011 Huawei pushed back strongly after the U.S. Commerce Department decided to block the company from participating in the construction of a nationwide, interoperable public-safety LTE network. A month later the House Permanent Select Committee on Intelligence launched a probe into the two companies, which intensified during 2012 and included testimony from executives of the companies.

After a year-long investigation that lawmakers said Huawei and ZTE failed to fully comply with, the intelligence committee produced a report in October that recommended the U.S. block acquisitions and mergers involving the two firms and also recommended that the U.S. government and U.S. companies avoid using equipment from the two Chinese companies. Since then, Huawei and ZTE have pushed back strongly against the report, as has the Chinese government. However, it seems like Huawei's lobbying strategy was for naught and the companies are now seemingly farther away from cracking the U.S. infrastructure market than they were two years ago.