Huawei Technologies is flexing its legal muscle in the face of a heightened risk of being shut-out of major national 5G network equipment contracts across the Nordic states.
The Chinese company suffered a fresh setback in mid-December when a Swedish court overturned its injunction to put the brakes on the Post and Telecom Authority’s (Post- och Telestyrelsen/PTS) 5G spectrum auction plans.
Of central concern for Huawei were conditions inserted by the PTS into the 5G auction licensing process that would effectively prohibit the company from supplying equipment to 5G network builds and operators in Sweden.
The court ruling gave the PTS leave to move ahead with the 5G-sphere auction and offer license concessions in the 3.5GHz and 2.3GHz frequency bands on 19 January 2021.
“The frequency allocation in the 3.5GHz and 2.3GHz bands is crucial for 5G development in Sweden. It impacts the digitisation of society. PTS will hold the auction despite the fact that the conditions must be tried legally,” PTS said in a statement.
“Protecting Sweden’s security is an essential public interest. PTS has determined that the conditions specified by the security services and armed forces should apply to the permits granted.”
In November, the Stockholm Administrative Court awarded an injunction to Huawei to suspend the PTS 5G spectrum auction process. Huawei’s legal action was triggered by the PTS’s decision to exclude it from taking part in the auction, due to what the telecom authority described as “reasons pertaining to national security”. The PTS barred a second Chinese company, ZTE, from participating in the auction on the same grounds.
Huawei’s legal bid to stop the auction from proceeding proved short lived. The PTS sought an immediate retrial of the Stockholm Administrative Court’s ruling in the Administrative Court of Appeal.
The outcome gave the PTS the right to proceed with the 5G spectrum auction pending a full judicial review of Huawei’s original complaints which are expected to be heard during the first quarter of 2021.
The PTS’s decision to exclude Huawei from the 5G spectrum auction is based on miscalculations and confusion, said Kenneth Fredriksen, the company’s executive vice-president of Central East Europe and Nordic Region.
“We view the court judgment as confirming our right to take part in the action. We believe PTS is making a mistake by not allowing Huawei to participate in the licensing process,” Fredriksen said.
“It is our hope that PTS will not start the auction process until a full court hearing is convened and a conclusion has been reached regarding the main legal arguments we presented to the administrative court.”
Kenneth Fredriksen, Huawei
Huawei has offered to establish a formal “constructive dialogue” with the PTS and Swedish authorities, said Fredriksen, that would provide solid guarantees to allay fears relating to any safety and security issues around use of its 5G technologies and equipment.
To win further favour with authorities in Sweden, Huawei has even offered to build a test facility in partnership with Ericsson to validate the probity of its 5G technologies and equipment. The company has also offered a security-focused Swedish government a “no backdoor” agreement covering equipment supplied to 5G networks.
The PTS’s decision to exclude Huawei from the 5G spectrum auction followed a lengthy consultation with Säpo, Sweden’s national security service, and Must (Militära Underrättelse- och Säkerhets Tjänsten), the country’s military intelligence and security service which operates under the direction of the Swedish Armed Forces Command.
Säpo and Must both advised the PTS to impose a 5G-supplier bar on Huawei, alleging the company has close cooperation with state and military organisations in China that pose a serious threat to Sweden’s national security – claims which are vigorously denied by Huawei.
The Swedish government approved of the PTS’s decision to block Huawei and ZTE from the 5G spectrum auction, said Anders Ygeman, Sweden’s minister for digitisation.
“PTS made the correct assessment regarding Huawei. It is good that the telecom authority is able to move forward with the 5G frequency auctions. The 5G development project is important for Sweden, and the frequency allocations are crucial to network expansion,” Ygeman said.
Phasing out Chinese 5G infrastructure
The PTS is not alone in barring Huawei and ZTE from participating in the 5G spectrum auction. In October 2020, Swedish authorities also disallowed the two Chinese rivals from having any role in its national 5G build-out.
Moreover, conditions linked to the 5G auction process require the eventual frequency licence holders to abandon all use of products supplied by ZTE and Huawei in new installations or new implementation of central functions for radio use in the frequency bands.
To this end, future 5G frequency licence holders must phase out and remove all use of gear provided by Huawei and ZTE from existing infrastructure and core functions by January 2025 at the latest.
Huawei’s legal response was cast in October when the PTS published a short list of four Nordic and international telecom groups. The four were approved from a total of more than 20 applicants to take part in the 5G spectrum auction.
The short list includes Net4Mobility, a joint venture of Telenor and Tele2, and Hi3G Access, owned by the Hong Kong headquartered Hutchison Whampoa. Telia Sverige and the state-controlled Teracom will also take part in the auction.
Tre was among the applicants that failed to make the short list. The mobile communications company, which had partnered with Huawei to build its 5G network in Sweden, filed a “business disturbance” lawsuit against PTS in November when the telecom authority blocked Huawei from the process.
Intent to appeal
Huawei has signalled its intent to lodge an appeal against the outcome of the 5G spectrum auction should the PTS allocate frequencies ahead of a full hearing of its legal objections in the administrative court.
A fundamental area of legal contention for Huawei is the specific role of the PTS, and whether it has the authority to bar the company from taking part in 5G auctions, offering its technologies to Swedish network operators, or can prohibit Huawei from supplying new 5G installations in Sweden.
Huawei’s scope for 5G-product sales continues to narrow across the Nordic region. Finland’s parliament, the Eduskunta, passed amendments to the National Security Act on 7 December that has the power to exclude “high-risk technologies and equipment” from use in 5G networks on the grounds of “national security endangerment”.
The new legislation, which does not specifically name or ban individual equipment supply companies, aims to bolster the country’s defences against espionage and attacks from the cyber domain directed at critical national communications systems.
Unsurprisingly, the PTS “block out” of Huawei provoked a strong response from the Chinese government, which threatened retaliatory measures against the more than 600 Swedish companies with operations in China unless the Swedish government guaranteed an open marketplace offering fair competition for Chinese companies in Sweden.
“There are zero facts pointing to security problems in the equipment of Huawei and ZTE. Sweden’s decision is an abuse of the concept of national security. This uses administrative means and state power to exclude and crack down on specific Chinese companies. Such a decision goes against market economy principles and free competition. If Sweden excludes specific Chinese companies from its 5G market, it cannot be without consequences,” said Gui Congyou, China’s ambassador to Sweden.