European telecoms’ dilemma: Huawei or fade away?

Huawei has quietly become a leading supplier of the backbone equipment for mobile networks, and is between six months and one year ahead of Sweden’s Ericsson in terms of the quality of its 5G equipment. (AFP)
Updated 03 February 2019

European telecoms’ dilemma: Huawei or fade away?

  • China’s Huawei has quietly become a leading supplier of the backbone equipment for mobile networks
  • In 2017, Huawei was by far the number one supplier of equipment for telecom networks, with a 22 percent market share

PARIS: It’s a dilemma for European telecoms firms: Should they steal a march on competitors and rapidly roll out next-generation 5G mobile networks using equipment from top supplier Huawei? Or should they heed US-led warnings of security threats and sit tight, and possibly fall behind?
Getting it right will have big consequences as 5G networks are the next milestone in the digital revolution, bringing near-instantaneous connectivity, vast data capacity and futuristic technologies.
No operator wants to be left behind, and neither do governments who see 5G technology as a future key driver of economic growth.
China’s Huawei has quietly become a leading supplier of the backbone equipment for mobile networks, particularly in developing markets thanks to cheaper prices.
Spearheading cutting-edge 5G equipment has also seen it make inroads into developed markets.
However, a growing number of Western states are turning their backs on Huawei, fearful that its equipment could be a Trojan horse for Beijing’s intrusive security apparatus as Chinese laws require its firms to cooperate with intelligence services.
Huawei strenuously denies its equipment could be used for espionage.
While most European governments are trying to make up their minds, mobile operators must make their own choice, and it’s a tough one.
Several operators have already begun tests with Huawei equipment, such as Bouygues Telecom and SFR have in several French cities.
“Huawei is today more expensive than its rivals but it is also much better, they have really moved ahead in terms of quality of network equipment over their European competitors,” said an executive of one European mobile operator recently on condition of anonymity.
Experts say Huawei is between six months and one year ahead of Sweden’s Ericsson in terms of the quality of its 5G equipment.
The number two mobile network equipment manufacturer, Finland’s Nokia, is said to be even further behind.
“Many want to avoid the Chinese but they are currently the most advanced in the area,” said Victor Marcais, a telecoms and media specialist at Roland Berger consultancy.
“Huawei has moved in the past few years from being the ‘low cost’ option to becoming the 5G leader.”
Several sources said that Huawei even helped Nokia in research and development to avoid facing off alone against Ericsson in 5G.
Huawei would only say that it has “long-term partnerships” with several of its competitors in areas such as production methods, standards and patents.
“We have always defended the principle of open innovation and collaboration to facilitate the development of the telecoms industry,” a Huawei spokesman said.
After establishing itself as a player on 4G networks, the Shenzhen-based group has doubled down to dominate 5G.
Each year it invests between 10 and 15 percent of its sales revenue on research and development. It spent $13.8 billion on R&D in 2017 and $15 billion last year.
The strategy is paying dividends.
In 2017, Huawei was by far the number one supplier of equipment for telecom networks, with a 22 percent market share, according to IHS Markit. Nokia trailed with a 13 percent share and Ericsson with 11 percent.
That gap could grow as more operators across the world develop 5G networks, although the current geopolitical tensions pose a risk to Huawei exploiting its technological lead.
European nations, like those in Asia and the US, want a rapid rollout of 5G with the first services expected to be running next year. A target that is difficult to attain without recourse to Huawei.
“The regulators and governments have quite ambitious timetables while the operators see 5G as a way to reduce costs per gigabyte as data volumes explode,” said Marcais at Roland Berger.
“However, we see in Germany, for example, they aren’t happy the way things are shaping up.”
Deutsche Telekom, in an internal document obtained by Bloomberg, warned that Europe could fall behind China and the US by as much as two years if it forgoes using Huawei’s 5G equipment.

Eni issues fraud complaint over suspect Iraqi shipment

Updated 18 July 2019

Eni issues fraud complaint over suspect Iraqi shipment

  • Italian oil multinational asks if rejected tanker cargo contained Iranian crude targeted by US sanctions

LONDON: Eni has filed a fraud complaint against its former head of oil trading over a suspect Iraqi crude oil shipment, amid concerns inside the Italian oil major that the failed delivery may have included Iranian crude targeted by US sanctions.

In the filing to the Milan prosecutor’s office, Eni accused its former head of trading and operations, Alessandro Des Dorides, of misleading all parties to the deal and hiding the role of a small Italian oil trading firm, Napag.

Two other senior employees were either demoted or suspended as a result of the failed shipment, sources said.

Eni said it had suspended dealings with Napag in February over a separate investigation by Milan prosecutors into suspected obstruction of justice by members of Eni’s former legal team.

Eni said that it fired Des Dorides at the end of May, after he had been in his job about six months, for what it said was an unrelated petrochemical deal with Napag in 2018.

Napag did not respond to an emailed request for comment or answer phone calls.

Des Dorides did not respond to several requests for comment from Reuters via email or LinkedIn. Reuters could not locate legal representation for him.

Eni also declined to comment. Eni said it “does not comment on ongoing investigations and internal due processes.”

The crude arrived aboard the White Moon tanker at the end of May for offloading at the Milazzo refinery in Sicily, which is part-owned by Eni. The Italian oil major, which produces oil in Iraq and is a regular buyer of Iraqi crude, was solely responsible for the cargo.

However, Eni said it rejected the delivery because it did not match the Iraqi Basra Light crude it expected from its counterparty, the Dubai-based trading arm of Nigerian firm Oando.

After sitting offshore for three weeks, the White Moon sailed back to the Gulf. The tanker manager did not respond to a request for comment.

Two sources at Eni said the White Moon’s 1 million barrel cargo created panic within the company over fears the crude could be, at least partially, Iranian.

Handling Iranian oil would have breached sanctions the US reimposed or extended last year after quitting a nuclear deal between Iran and world powers.

Washington aims to reduce Iran’s exports to zero and force the Islamic Republic to renegotiate that nuclear deal, curb its missile program and modify its behavior in the Middle East.

Iran has called on other parties to the accord to shield it from the effects of US sanctions and has sought to circumvent US restrictions by selling more of its oil undercover.

Following the rejection of the White Moon shipment in June, the head of the Italian Senate Industry Committee wrote to Eni Chief Executive Claudio Descalzi to clarify the origin of an oil cargo labelled as coming from Iraq, the head of the committee said.

The head of the committee declined to comment to Reuters on the oil’s possible origins.

Eni said it bought the crude from Nigerian firm Oando, who in turn bought the oil from the London branch of Italy’s Napag.

Oando said it took back the cargo from Eni, but declined to comment further on the origins of the cargo as it was “in the middle of a resolution” over the rejected oil. Oando said the terms of the deal were “normal for the trading industry.”

Italian prosecutors cannot legally comment on any investigation unless there is an exceptional circumstance.

Trading sources familiar with the deal said the offer terms for the crude should have raised alarms internally even before its arrival off Sicily. The offer was at a significant discount to typical Iraqi trades, was paid for in euros and was from a firm that is new to the region, they said. Physical oil is commonly traded in dollars.

Eni said that the mismatch in the crude’s chemical composition “coupled with other red flags led to the decision to terminate the transaction.”

The oil loaded onto the White Moon came via two ship-to-ship transfers that makes the origin harder to track, sources said.

The crude bought from Oando was loaded onto the White Moon from another vessel, the New Prosperity, but that vessel itself had been loaded with oil from a third tanker, the Abyss.

The Abyss makes regular voyages through the Mideast Gulf with its transponder switched off for days at a time, according to Refinitiv Eikon ship tracking. The transponder was switched off between April 24 and May 3 when it transferred oil to the New Prosperity.