Telefonica taps Huawei for 5G core, as DT freezes 5G deals amid uncertainty

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Telefonica won’t solely rely on Huawei though, and plans to select a second supplier for its 5G core network next summer. (Getty Images)

Telefonica has reportedly chosen Huawei as one of the vendors for part of its 5G network in Spain, in contrast to Deutsche Telekom, which last week decided to put 5G equipment deals on hold until political uncertainty around the Chinese vendor is resolved, according to Reuters.   

Deutsche Telekom is parent to U.S. operator T-Mobile, which separately is kicking off the start of a historic antitrust trial today that will decide whether it can merge with the nation’s fourth-largest wireless carrier, Sprint.  A coalition of 14 state attorneys general led by New York and California united in a lawsuit to block the proposed $26 billion merger.

When it comes to Huawei, the U.S. has campaigned for allies around the world to bar the vendor from 5G networks, citing national security concerns. At home, the U.S. government has taken multiple steps to keep the vendor out of telecom networks, including a recent FCC decision that bars service providers from using Universal Service Fund subsidies to purchase equipment from Huawei and fellow Chinese vendor ZTE.   

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Huawei has continuously denied allegations that it could be used as an apparatus to engage in activities like espionage for the Chinese government. Last week, Huawei filed a lawsuit in a federal U.S. appeals court seeking to throw out the FCC decision, calling it unlawful.

While some countries have fallen in line with the U.S., Huawei’s fate in Germany has remained unclear. In October, a government spokesperson said the country’s security catalog would not pre-emptively ban any single company from next-generation mobile networks.

Reuters last week reported that DT froze all deals for purchasing 5G network equipment while it waits to see if Germany will ban Huawei from the country’s next-generation communications infrastructure over security concerns.

The report noted that senior lawmakers called for a ban on Huawei, objecting to a proposed regulatory framework backed by Chancellor Angela Merkel that would’ve scrutinized technology security from all vendors.

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“In light of the unclear political situation, we are not currently entering into any 5G contracts - with any vendor,” DT told Reuters. “We are currently informing vendors of this.”

Huawei is already a major equipment vendor for existing mobile networks in Germany, and operators had been concerned that excluding the Chinese supplier could add billions of dollars to the cost of 5G deployments and result in years of delays. DT launched its initial 5G network earlier this summer in six cities, with plans to expand to the 20 largest cities in Germany.

“We hope that we will get political clarity for Germany’s 5G buildout as soon as possible, so that we do not fall behind,” DT said to Reuters.

Telefonica opts for multiple 5G vendors

While DT awaits resolution in Germany, Telefonica has decided to use Huawei for at least part of its 5G mobile core network in Spain, according to Spanish news outlet Expansion.

Once the U.S. placed Huawei on a trade blacklist in May, Telefonica had been reviewing network equipment deals and how they might be impacted.

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In Spain, Huawei is already present in mobile networks, supplying equipment for Telefonica’s 3G and 4G core networks, which the company indicated would make it difficult to not use Huawei gear in its 5G network.

The mobile operator won’t solely rely on Huawei though, and plans to select a second supplier for its 5G core network next summer, which according to sources could be major vendors Ericsson or Nokia, or a newer entrant from the U.S. such as Affirmed Networks or Mavenir.

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While Huawei will be providing 5G core network equipment, Expansion noted that aspect only accounts for about 5% of the total investment, with radio base stations carrying the lion’s share.  Telefonica doesn’t use Huawei in its roughly 18,000 4G base stations in Spain.

Ericsson ranked as the top mobile core network vendor in the third quarter 2019, according to a recent Dell’Oro report, capturing 26% market share for a slight lead over Huawei with 25%, followed by Nokia 15%, ZTE with 10% and Cisco with 7%.

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