Embattled Huawei to Exit Undersea Cable Business After Trump Ban

Embattled Huawei to Exit Undersea Cable Business After Trump Ban

(Bloomberg) -- Huawei Technologies Co. is selling its majority slice of its global submarine cable division, exiting the business of laying undersea piping for the internet just weeks after the Trump administration blocked it from buying American technology.

Huawei’s corporate parent is selling its 51% of Huawei Marine Networks to Hengtong Optic-Electric Co., a Jiangsu-based optical-cable manufacturer, according to a stock exchange filing. The deal isn’t formalized and subject to change, Hengtong said in the filing. The Chinese company, whose Shanghai-listed shares have been suspended from trade, didn’t disclose the size of the deal.

A Huawei spokesman declined to comment. Huawei Marine and Hengtong didn’t immediately reply to calls and emails from Bloomberg News.

President Donald Trump’s administration has targeted Huawei for months, first encouraging allies to ban the Chinese company’s equipment from their networks and then putting Huawei on an export blacklist that prohibits it from buying American software and components. Founder Ren Zhengfei talked about the possibility of a strategic retreat -- for instance by shrinking in scale -- after the Commerce Department blacklisted Huawei and 67 of its affiliates across the world in May.

Huawei Marine, a joint venture between Huawei and British undersea cable firm Global Marine Systems, has drawn scrutiny because of its role in building fundamental internet-connection infrastructure. The U.S. and Australia in particular are said to be concerned about information security, arguing Beijing can take advantage of projects built by Huawei to conduct espionage. Huawei has repeatedly denied such allegations.

Huawei Marine plays a key role in Ren’s ambitions. It’s involved in building about 90 undersea cable projects from the Pacific to the Atlantic, laying over 50,000 kilometers of undersea cables, according to an introduction on the company’s website. It also built multiple cable routes from England to the vicinity of Cape Town, South Africa. Other high-profile projects include a cross-Atlantic route that would link Brazil and Cameroon.

Yet the submarine unit is a relatively small business for Huawei, which generates annual sales bigger than Alibaba Group Holding Ltd. and Tencent Holdings Ltd. combined. Huawei Marine contributed a net profit of 115 million yuan ($17 million) for its holding company in 2018, according to Huawei’s annual report.

©2019 Bloomberg L.P.

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