April 4, 2010 10:29 pm

Huawei tries to calm US fears

Huawei, the Chinese communications equipment maker, is in talks with US defence and intelligence agencies as part of a campaign to assuage persistent fears among US officials about the company’s alleged ties to the People’s Liberation Army.

It is making the lobbying push in preparation for a potential bid for a unit of Motorola, the US mobile phone manufacturer, and other possible US acquisitions in the future.

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The company is considering negotiating a “mitigation agreement” with the US government – as Alcatel of France did when it bought Lucent in 2006 – in order to show its willingness to co-operate with the US. Such agreements, which are usually classified, include strict security procedures and in some cases the creation of an advisory panel consisting of US citizens to oversee sensitive operations in the country.

When Huawei was asked about its willingness to enter a mitigation agreement, it said it was “open to exploring options to address concerns” of the US government.

Huawei had to abandon a 2008 joint bid to take over 3Com after it became clear that the deal would be blocked on national security grounds by the then administration led by George W. Bush .

Since then, people familiar with the issue say, some US officials who are wary of the company have been frustrated by Huawei’s ability to secure contracts with US telecommunications groups, such as Clearwire and Cox Communications.

Huawei has said it has no connection to the Chinese military. But Ren Zhengfei, its founder, is a former soldier in the PLA.

A committee of US government agencies known as Cfius can legally block acquisitions of sensitive US assets by foreign companies if it deems that the deals pose a threat to security. But there is no legal mechanism for the government to block Huawei or other companies from expanding their businesses in the US.

“One thing people are struggling with is [US government officials] would prefer American companies not to buy Huawei equipment,” said James Lewis, a senior fellow at the Center for Strategic and International Studies.

Charlie Chen, senior vice-­president of marketing at Huawei Technologies (USA), said in a written response to questions by the Financial Times: “We are aware that some in the US government have expressed concerns about Huawei and we will work diligently to address those concerns.”

It is far from certain whether Huawei’s campaign will be successful. Google’s decision to shut down its Chinese-language portal after it said it had been the victim of hacking attacks from China has increased tensions over alleged Chinese hacking and – in the case of Huawei – some privately held fears within the US government over spying.

According to a person who was briefed by the company, Huawei has hired Electronic Warfare Associates, a group that, according to its website, conducts “network security assessment”. Mr Chen said the company was “talking with third party experts” in its effort to address questions regarding security and reliability, but would not comment specifically on its work with EWA.

“The Google situation has no bearing on our business activities whatsoever,” Mr Chen said.

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