Trump’s tweets and the Chinese vendor’s dominance mean US officials fought an uphill battle at this week’s global telecoms fair.

By Laurens Cerulus | 3/1/19, 4:30 PM CET | Updated 3/2/19, 1:40 PM CET

BARCELONA — In a global standoff that pits U.S. security services against Chinese telecom giant Huawei, it was the latter who came out as the winner at a high-stakes gathering in Barcelona this week.

At the annual Mobile World Congress fair, Huawei was up against combative U.S. officials who toured government delegations calling the Chinese vendor "deceitful" and arguing that it poses a security threat to the West.

But Huawei was playing on familiar turf in Barcelona, where some 100,000 telecoms executives had gathered for industry shop talk and ogling at new tech innovations. Huawei's brand was plastered all around the conference venue, for which it was a key sponsor, and it chose to launch its new, flagship product at the fair: the foldable Mate X smartphone.

Huawei's chief didn't hold back on the politics, either.

"The U.S. security accusation on our 5G has no evidence, nothing," the company's Rotating Chairman Guo Ping said in his keynote speech Tuesday. He slammed Washington by saying that those concerned about government spying "can go ask Edward Snowden" — a blunt reference to the 2013 scandal that revealed mass surveillance of global data flows by the U.S. National Security Agency.

The U.S. apparatus had targeted the Barcelona telecommunications conference as the peak of a monthslong campaign to convince European and global allies to cut out Huawei.

It followed a visit by U.S. Secretary of State Mike Pompeo to Eastern Europe earlier in February, in which Huawei featured at the top of the talking points, and a keynote speech by U.S. Vice President Mike Pence at the Munich Security Conference mid-February warning for "the threat posed by Huawei and other Chinese telecoms companies."

But days before the final offensive in Barcelona, the U.S. strategy got sidetracked by rumblings in the country's bilateral negotiations of a trade deal with China. President Donald Trump suggested that criminal charges against Chinese telecoms giant Huawei and one of its top executives could be used as a bargaining chip in his administration's ongoing trade negotiations with China. "We're going to be discussing all of that during the course of the next couple of weeks," Trump said.

The statement came after tweets by the U.S. president, where he hinted at supporting open competition in the telecoms vendor market — which caused confusion across the telecoms market at a time when operators are looking for clarity on major 5G contracts.

By the end of the four-day gathering, U.S. Deputy Assistant Secretary of State Rob Strayer had called Huawei "duplicitous and deceitful" but failed to pressure the Europeans into committing to new measures against Huawei.

Huawei in Europe

Huawei's full-court press in Barcelona came at a critical time, as the company has been shut out of major Western markets in past months, and its strategy to scale up relies heavily on the revenue it is generating on the European Continent.

A diplomatic campaign from Washington in Western and allied capitals in past months have triggered new restrictions in Australia and Japan, and others could follow suit in coming months — giving its competitors on 5G infrastructure including Ericsson, Finnish Nokia and Korean Samsung a leg up in the global race for networks.

Europe's joint market accounts for 10 to 15 percent of Huawei's revenue, company figures show, versus more than half for the domestic market in China, 11 percent for the Asia-Pacific region and just 7 percent for the Americas.

Vincent Pang, the company's president for Western Europe, stressed the importance of the Continent at a briefing with reporters in Barcelona. "It doesn't matter what happens in any single country in Europe. We will stay here," Pang told reporters, adding that Huawei considers Europe "the most powerful innovation house in the world."

Europe's importance explains partly why Huawei has invested so heavily in the region. The equipment maker has struck many deals with the Continent's largest telecoms operators in the past decade. It also set up "security centers" where operators can run security checks on its equipment, in an effort to preempt criticism.

Huawei's entanglement with Europe's telecoms networks and its operators have also scared off powerful industry groups, who fear restricting or even banning Huawei will cost billions of dollars to the Continent's largest operators like Deutsche Telekom, Vodafone and others.

EU leaders in past weeks disputed the need for a blanket ban on Huawei products, which the U.S. wants. Instead, they are pushing ahead with a series of midway network security measures that will ultimately preserve China's presence in broad swathes of European telecoms markets — in a classic "third way" approach to the issue.

As pressure on the Chinese vendor rises, its competitors have tried to get ahead of the game.

"[We] have already deployed operational 5G networks based on commercial equipment in Europe, Australia and Asia," Ericsson's director, Johannes Arvidson Persson, said in emailed responses to questions.

At the end of the Barcelona fair, the Swedish company secured 14 5G contracts with operators, of which it keeps a running list online. It includes European contracts with Vodafone U.K., Telenor in Norway, Wind 3 in Italy and Swisscom in Switzerland.

Huawei on the other hand claims to have more than 30 5G contracts worldwide, and 13 in Europe — but didn't disclose the list of operators it struck deals with. In Europe, it said Vodafone, EE (owned by BT), Telecom Italia and Sunrise in Switzerland have signed with the company. Huawei said some of its partners have asked not to be named because of fear of political backlash.

One of Ericsson's main advantages worldwide is that it is the first to go live with commercial 5G networks in the United States — a country that has restricted Huawei's access in past years, and formally shut the market for Chinese vendors last year.

According to Jan-Peter Kleinhans, an analyst and 5G security expert at the Berlin-based Stiftung Neue Verantwortung, "I don't think that, in the summer, we'll live in a Europe where the majority of [EU] member states banned Chinese manufacturers."

"The big question is how many member states realize that 5G is not a unique issue," he said. "People are waking up and realizing: 'Holy sh*t, Chinese ICT is everywhere, we do not trust the country, we do not trust its government, what do we do?'"