Telecoms Tempted by Huawei Despite Security Concerns

Telecoms poised to launch 5G mobile services in the first half of next year are faced with the dilemma that China's Huawei is a hugely competitive player but allegedly prone to security breaches.

Korea's three major telecoms plan to select their equipment providers in the first half of this year, investing more than W20 trillion to build 5G infrastructure over the next five years (US$1=W1,071). Samsung, Nokia, Ericsson are competing fiercely for a slice of this market with Huawei.

Telecoms are worried because the U.S. is constantly raising security concerns about equipment from Huawei, which it seems to regard as the fifth column of the Chinese government. One telecom insider here said, "Huawei's equipment is not only cheap but also technologically superior, which makes it extremely enticing, but these security concerns are a big headache."

Huawei beat Ericsson and Nokia last year to become the world's No. 1 telecom equipment maker, and its products are 30 to 40 percent cheaper than its rivals'.

But concerns are mounting that the company, which is under the control of the Chinese government, could be exploited to spy on other countries. Huawei founder Ren Zhengfei used to be a People's Liberation Army officer and reportedly maintains close ties with the Chinese government.

Already the company has been effectively ousted from the U.S. market. In January last year, AT&T scrapped its plan to sell Huawei smartphones in America, and U.S. intelligence officials last month appeared before Congress and warned against using Huawei and ZTE equipment.

According to industry insiders, around 10 percent of mobile equipment used in Korea is made by Huawei, though Samsung, Nokia and Ericsson still dominate.

In 2013, LG Uplus was the first Korean telecom company to team up with Huawei for LTE infrastructure linking Seoul, surrounding Gyeonggi Province and neighboring Gangwon Province. At the time, the Korean government and U.S. military voiced concerns that sensitive information could be leaked, prompting LG Uplus to pledge not to use Huawei equipment around the main U.S. military base in Yongsan.

SK Telecom and KT do not use Huawei's equipment in key communications hubs but in some remoter areas. Huawei denies the suspicions. A Huawei staffer said, "We supply products to 170 countries. These safety concerns are merely suspicions and there has never been a security breach."

Yet telecoms preparing for large-scale investments remain extremely tempted by Huawei's affordable equipment. Korea's three telecoms are estimated to have invested more than W15 trillion to in the existing LTE network, and the 5G network, which is expected to cost even more.