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Report on Business ‘It’s a globally integrated world’: Telus executive defends Huawei as Ottawa weighs potential ban

One of Telus Corp.’s top executives is defending the company’s relationship with Huawei Technologies Co. Ltd., saying that global supply chains make it difficult to avoid working with companies that do business in China.

Speaking at the Canadian Telecom Summit in Mississauga on Wednesday, Telus executive vice-president of technology Eros Spadotto pointed to the Chinese vendor’s main rivals in the telecom equipment space, Finland’s Nokia Corp. and Sweden’s Ericsson. Those vendors assemble products in China and, he noted, also conduct research and development there.

“The value chain is not only manufacturing any longer. It’s from front to back, from R&D all the way to manufacturing. It’s a globally integrated world,” Mr. Spadotto said. “For me, the question is not ‘China, yes or no?’ The question is ‘How?’ ”

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Telus has built the radio portion of its existing wireless network using Huawei’s radios and antennas and aims to continue working with the company as it upgrades to 5G, the next generation of wireless technology. The Vancouver-based company has been vocal in its opposition to a ban of Huawei equipment from 5G networks.

The Canadian government is conducting a cybersecurity review of 5G technology that is expected to determine whether Huawei can continue to sell its equipment in this country. The decision will be crucial for Telus, which has said that a ban could lead to a “material” increase in the cost and delay the timing of its 5G deployment.

Ottawa announced timelines for the next auction of 5G airwaves on Wednesday, and in recent weeks said it expects to conclude its security review before the election in October.

Minister of Innovation, Science and Economic Development Navdeep Bains said there are “clear issues and concerns around safety and security” with 5G and said that’s why the government is working on the security review. He added the government is still in the process of “doing our due diligence.”

Huawei has been at the centre of what some, such as Mr. Spadotto, say is a trade war being waged by the United States. Intelligence authorities from the U.S. have tried to persuade allies not to work with the Chinese company, warning about the risk of surveillance by the Communist government. Huawei has said it would never spy for the Chinese government, despite a Chinese law that requires companies to conduct espionage if requested by Beijing.

The U.S. has threatened to curtail the sharing of sensitive intelligence to countries that allow Huawei into their 5G networks, particularly members of the Five Eyes intelligence-sharing alliance that includes Canada, Britain, the U.S., Australia and New Zealand. The latter three have taken steps to bar domestic wireless companies from installing Huawei’s equipment as they build 5G.

In mid-May, the U.S. Commerce Department said it will block American companies from selling to Huawei, a move that is still reverberating around the world as computer-chip makers and other technology suppliers face losing one of their largest customers.

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In Canada, BCE Inc. has also used Huawei equipment extensively in its radio network, but Rogers Communications Inc., the country’s largest wireless carrier, has used it only in limited deployments and has said it will work with Ericsson on 5G.

In a television interview with BNN Bloomberg last week, Phil Lind, vice-chairman of Rogers’s board of directors, said Huawei should not be allowed to “control or potentially control our communication system in Canada.”

“He was speaking in a personal capacity and not on behalf of the company. We continue to await the results of the federal government’s review," Rogers spokeswoman Sarah Schmidt said Wednesday of Mr. Lind’s comments.

Like BCE and Telus, Rogers does sell Huawei smartphones, and it also has a long-term advertising contract with the company, which is the lead sponsor for the Rogers-owned Hockey Night in Canada broadcast.

Speaking at the telecom conference on Monday, Huawei Canada's chief security officer Olivera Zatezalo emphasized her own ties to Canada and the trust she has in the federal government’s cybersecurity authorities, who decide which products can be used in this country.

Ms. Zatezalo said Huawei only sells 59 of the 2,000 products it makes in Canada, where the government does not permit it to sell equipment for network cores, which carry more sensitive data. After Huawei’s radio and antenna products are cleared by security authorities, she said: “We give them to carriers and the carriers have the keys to their network. So, nobody from China or nobody even from Huawei Canada can do anything or touch or see the data, only the carriers.”

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Asked about Huawei’s independence from China’s communist regime, after a Globe and Mail report that it worked with the government to develop citizen-surveillance capabilities in the country’s far-western Xinjiang region, she replied that the company operates in 170 countries around the world and follows local rules everywhere it does business.

“Huawei Canada is Canadian-owned," she said, later clarifying that she meant the company is incorporated with the federal government in Canada. "I am Canadian; we’ve worked with the Canadian government for a number of years.”

Telus’s Mr. Spadotto said Wednesday that one benefit of the scrutiny surrounding Huawei has been increased attention on security standards for 5G equipment in general.

“The standards community has woken up and has discovered that we better work on 5G security in a deeper, meaningful way and across all infrastructure providers, because the supply chain comes from around the world,” he said.

Telecom industry sources, whom The Globe granted anonymity because they were not authorized to speak publicly, have said when Huawei first entered the Canadian market a decade ago, it offered prices 30 per cent to 50 per cent lower than its European rivals but that the gap has narrowed in recent years as Nokia and Ericsson fought harder for business and Huawei sought higher profit margins.

In his speech, Mr. Spadotto said that while Huawei is not necessarily cheaper than its rivals today, its presence in the market "creates competition for the other vendors, and for that, I’m thankful.”

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Editor’s note: Huawei Canada's chief security officer Olivera Zatezalo mistakenly said Huawei Canada is Canadian-owned in an earlier version of this story. In fact, it is a Canadian company.
Editor’s note: An earlier version of this story misstated the number of countries in which Huawei operates worldwide.
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