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Huawei poised to sell its undersea cabling division after rising cyber-security concerns

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Huawei will sell 51 per cent of its undersea telecommunications cable business, according to an exchange filing seen by Reuters.

Huawei has recently been struggling with its business ventures in the West due to concerns that its technology and infrastructure could pose an “unacceptable risk” to cyber security.

The filing on the Shanghai Stock Exchange was from optical communication network products company Hengtong Optic-Electric, which is based in Jiangsu province.

It signed a letter of intent with Huawei on May 31 2019 to buy the stake via cash and share issuance, although it did not mention a price.

Huawei has previously faced difficulties in getting business with its undersea cable division. In January 2018, Australia’s security agency banned Huawei from connecting to the Australian broadband network over fears that it could be used by the Chinese Government to intercept communications.

Huawei declined to provide immediate comment when contacted by Reuters.

The company’s main business of selling telecom network equipment has increasingly come under scrutiny in the West, which is backing out of using it for the construction of next-generation 5G networks.

Its smartphone business has also been hit badly after Google revoked its Android licence, which will mean future devices will need to run an in-house operating system that has been tentatively dubbed Ark OS.

Google’s decision followed a trade ban by the US Commerce Department last month which threatens to significantly disrupt its supply chain, although it has since been given a temporary reprieve.

In March 2019, the Wall Street Journal cited US security officials as saying that undersea cables built by Huawei could be vulnerable to espionage by the Chinese state, an accusation that the company denied.

Huawei Marine, established in 2008 as a joint venture with Britain’s Global Marine, is mainly engaged in the construction of global undersea communications cables.

According to Huawei Technology’s annual report, the tech giant gained majority voting rights on the board of Huawei Marine in August 2018 with Global Marine retaining a 49 per cent non-controlling interest.

Huawei Marine contributed revenue of 394 million yuan (£45m) and logged a net profit of 115 million yuan in 2018, according to the annual report.

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