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Its Undersea Cable Business To Be Sold By China's Huawei

Its Undersea Cable Business To Be Sold By China's Huawei
Its undersea cable business is being planned to be divested by Chinese tech giant Huawei Technologies Co Ltd as shown by a buyer’s filing. This is the first major divestment that the Chinese company is set to undertake since it became a target of the United States which accused the largest telecom equipment maker in the world of being a vehicle for espionage of the western countries by Chinese authorities.
The news of the divestment came to light after a filing at the Shanghai Stock Exchange done by an optical telecommunication network products firm based in Jiangsu province in China - Hengtong Optic-Electric Co Ltd, where in the company sent a signed letter to Huawei Technologies subsidiary Huawei Tech Investment Co Ltd on May 31, expressing its intent to acquire a 51 per cent stake in Huawei Marine Systems Co Ltd through a cash and share issuance.
The filing did not disclose a price. There were no comments on this issue from Huawei.
The tough opposition from the US and the placing of Huawei in its black list has threatened to put under pressure the core business of the Chinese company – that of telecom network equipment and smartphones, and therefore this sale of assets by the company assumes importance. The US has also been trying to convince its allies about not using Huawei products in telecommunications because they allegedly pose security risks.
Huawei has repeatedly denied those allegations and claimed that its business is not influenced by any Chinese authorities or the Chinese government. However the US Commerce Department put the company on its so called ‘entity list’ which effectively blocked the company from doing business in the US and from American companies exchanging products or technology with it. This has upended the global supply chain of the company – which was already under pressure because of the US–China trade war.
A news port published in The Wall Street Journal in March this year quoted a U.S. security official as saying that the US also suspected that the undersea cables built by Huawei Marine could also be a source of security threat.
Global internet traffic critically depends on undersea cables. Since Huawei Marine was established in 2008 as a joint venture with Britain’s Global Marine, the company has been steadily gaining market share in an industry that is dominated by US company SubCom, Japan’s NEC Corp and Europe’s Alcatel-Lucent.
According to the annual report of Huawei Technologies’, Huawei Marine reported net profit of 115 million yuan ($16.66 million) on revenue of 394 million yuan for 2018. The company has successfully executed 90 projects globally and has laid 50,361 kilometers undersea of cables according ot information available from the company website.
With a 15.66 per cent stake, privately owned Hengtong Group is the largest shareholder of Hengtong Optic-Electric, according to exchange filings. The second-largest shareholder of the firm, with 14.95 per cent company stocks is the founder and owner of Hengtong Group - Cui Genliang.

Christopher J. Mitchell

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