Nokia Replacing Huawei in Vodafone's German Core

Nokia is replacing Huawei in parts of Vodafone Germany's core network after winning an equipment tender about two years ago, a Vodafone spokesperson has confirmed.

The confirmation follows a report from Germany's Handelsblatt newspaper (subscription required) that Vodafone Germany is removing Huawei Technologies Co. Ltd. equipment from sensitive parts of the network and expects to complete that process in the next year.

That report came days after Vodafone Group plc (NYSE: VOD) CEO Nick Read said he would "pause" the deployment of Huawei's core network equipment in Spain and smaller European markets amid government concern about the risks posed by the Chinese vendor's technology. (See Huawei Controversy Pits Spooks Against CSPs.)

Several countries have now imposed restrictions on Huawei because they are worried its networks could be used by Chinese authorities for spying. (See Where Huawei Fears to Tread and How the West Can Hurt Huawei.)

Read said the debate around Huawei had become too "simplistic" and that he would speak with security agencies and government ministers about the consequences of excluding Chinese suppliers from equipment markets. A full ban on Huawei's sale of radio equipment would be a "huge issue" for the entire European telco sector, he said.

Vodafone's spokesperson said the decision to use Nokia Corp. (NYSE: NOK) in Germany was unrelated to the security issue.

"Almost two years ago -- and for commercial reasons -- Vodafone Germany initiated a tender process for some equipment in its core. Nokia was the successful bidder," he said. "This work will be completed during the next year. Clearly this has nothing to do with Nick's comments."

According to the Handelsblatt report, some Huawei components will continue to be used in the core network, although not in the most sensitive area. About half of the components used in Vodafone Germany's radio access network (RAN) will also come from Huawei, says the report.

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The details point to Huawei's strong presence in the German telecom sector. Besides catering to Vodafone, Huawei is one of two RAN suppliers used by incumbent operator Deutsche Telekom AG (NYSE: DT), the other being Swedish rival Ericsson AB (Nasdaq: ERIC). Deutsche Telekom is also understood to use core network technology from Huawei.

Earlier today, Reuters picked up on a separate Handelsblatt report that Germany wants to avoid excluding Huawei from its telecom equipment market. German Chancellor Angela Merkel is reportedly seeking assurances from Huawei that it will not pass any data to the Chinese government.

Huawei has repeatedly denied having close links to the Chinese state and told reporters it would not give information to Chinese authorities.

Several other European countries are thought to be considering moves against Huawei, although Italy's government today denied reports it was seeking to ban Chinese vendors from its 5G market. (See Eurobites: Italian Govt Denies Reports of Planned Huawei, ZTE 5G Ban.)

The backlash against Huawei and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) could lead to new opportunities for both Ericsson and Nokia, although both vendors have been cautious in their statements and have yet to see any surge in business. (See Huawei's Ills Don't Guarantee Good Times for Ericsson, Nokia.)

— Iain Morris, International Editor, Light Reading

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