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The ban on the Chinese telecoms hardware and products company Huawei becoming involved in the NBN is odd to say the least, but not for the usual litany of reasons trotted out by Defence and political strategists. In fact, the reports on the ban and the claimed fallout have failed to look at what Huwaei has been doing in Australia and with whom.

The links to media mogul Kerry Stokes and the Optus/Singapore Telecoms group make for fascinating speculation. But that seems to have slipped by much of the media. That’s a pity because it clearly shows Huawei is clearly trusted by Stokes’ media and business empire, which straddles Australia and reaches into China, and is not only trusted by the government of Singapore, but is about to become an essential part of the country’s telecoms infrastructure.

According to media reports in the past week, Huawei has been on the suspects list for years. The latest report was in the Fairfax broadsheets this morning.

I don’t know if the company is or isn’t a security threat, owned by the Chinese Army/government, or  is involved with China’s Public Security Bureau, but the reality is that the company is already involved in the Australian telecoms networks, some of which have to work with the NBN at some point.

Huawei had supplied modern, high-speed mobile phone networks for Vividwireless when it was owned by Stokes’ Seven Network, and it is down to supply a similar network for Optus. And Huawei is intimately involved with Optus’ parent Singapore Telecom (SingTel).

And, from a national security point of view, it should also be pointed out that Optus SingTel is involved in providing the Australian Defence Department with satellite-based telecoms services.

Now Huawei is about to start supply a so-called 4G mobile phone network for Optus in the Newcastle area. That will match the technology supplied to Vividwireless for its network in Perth and several other cities. Optus bought Vividwireless from Seven Group Holdings for $230 million earlier this year. Optus got the Vividwireless and Unwired businesses, customers, spectrum licence and existing 4G network. The purchase has given Optus more spectrum — 98 megahertz in the 2.3 gighertz frequency.

Optus said in the announcement in February that Vividwireless’s business “will be integrated with Optus’ 1800 megahertz 4G network, which will be launched in Newcastle and the Hunter region of New South Wales in April 2012”. That’s the system being built by Huawei.

“This is a real milestone for Huawei Australia, marking the deliver of our first 4G network,” chief technology officer Peter Rossi said in a statement about the Optus contract in the Hunter Valley and Newcastle, according to the Fairfax report. In a statement issued in March, 2010 about the Vividwireless contract, Huawei said:

Huawei has successfully deployed Australia’s first fourth-generation (4G) wireless network with Seven Network Limited company, Vividwireless. Now in operation across Perth, the network is the first step in vividwireless’ national WiMAX rollout and will deliver broadband speeds comparable to most ADSL2+ connections.

“It’s been a great experience for Huawei to work with Vividwireless on such an ambitious network rollout,” said Huawei Australia chief technology officer Peter Rossi. “Vividwireless now has an open, flexible, all-IP WiMAX network which has been built to deliver high-speed broadband and quality voice services.”

Besides raising the question about how the company could claim to be building “Australia’s first 4G wireless network”, the two statements make it clear that Huawei Australia is trusted by two big companies to provide the latest mobile wireless technology, which at some stage in the next few years, will be working (or should be) seamless with the NBN. Could Huawei have already, or be building into these networks, the sort of technology that is feared in Canberra at ASIO and others?

But there were reasons for the use of Huawei: Stokes chose it because of his extensive links to China mostly through Seven Group Holdings subsidiary WesTrac, the Caterpillar franchise holder for north-eastern China (and through his media deals in Shanghai). Given the amount invested in China and the revenue Stokes is generating (WesTrac was owned privately for years by Stokes’ main company, Australian Capital Equity (ACE), from selling Caterpillar equipment, a bit of quid pro quo is to be expected to underwrite his credentials as a trustworthy foreign investor.

Optus’ links to Huawei can be explained by a deal in March in Singapore. The same announcement revealed that Optus would vanish as a standalone operation and be folded into various parts of SingTel, at a loss of 700 jobs (on top of an earlier cull of 180 executives).

But in Singapore, SingTel and Huawei did a far bigger and more long lasting deal than just supplying mobile wireless networks. SingTel announced it was outsourcing its old copper. About 500 staff were culled and were to be offered jobs at a unit of China’s Huawei Technologies Co Ltd as part of a restructuring.

“Sino Huawei Technologies Pte Ltd will then operate and maintain SingTel’s copper-based voice and data network infrastructure in Singapore for an initial period of five years starting June,” SingTel said in a statement.“The initiative will allow SingTel to focus on core competencies such as product development, marketing and customer engagement,” said executive vice-president of networks Tay Soo Meng. Affected SingTel employees will be offered employment at Huawei with no change to existing roles, responsibilities, remuneration and benefits, the Singapore firm added.”

Now that is a far more intimate relationship than just a pure supplier. SingTel, which is controlled by Temasek Holdings, one of Singapore’s two Sovereign Wealth Funds, is the largest telecoms group in south-east Asia and the largest company in Singapore. It is part of the country’s establishment. Clearly that government has no worries about Huawei (even though the government is democratically elected, it is autocratic and dominated by the Lee Kwan Yew and his family).

And finally, there is an irony here in that the Stokes’ Seven Network opposed the SingTel takeover of Optus in 2001.

Media reports said Seven Network told the Foreign Investment Review Board that the proposed takeover of Cable & Wireless Optus by Singapore Telecommunications is a threat to national security and should be blocked. Stokes was chairman of Seven at the time. Its submission reportedly said the Optus takeover would result in a major carrier controlled by a foreign government exercising control over essential communications infrastructure. As the SMH reported:

“The most concern surrounds a communication satellite that CWO is to launch next year, which will be used for military and intelligence service communications as well as normal commercial communications.

“Stokes said that both Malaysia and China have stepped in to prevent the 87% government-owned SingTel taking major stakes in Malaysian and Hong Kong telecommunication companies.”

Since then Stokes has clearly changed his view, as has China. Now we have seen the two major customers of Huawei in Australia, Stokes’ Seven Network, and Optus, doing a deal to concentrate ownership of a 4G network in the SingTel subsidiary. Following the Vividwireless sale, all that is now concentrated in Optus, which is controlled by the Singapore government through Temasek Holdings controlling stake in SingTel. Optus/SingTel/Singapore government are the co-owners of the Defence Department’s satellite for Australian communications.

If Huawei technology is OK in this sort of relationship that brushes our sensitive Defence area, why is there sensitivity about the NBN?

Has Huawei mobile wireless technology been vetted before being installed into the vivid and Optus networks? And what sort of guarantees, if any, has the Singapore government sought for the SingTel joint venture (and remember Singapore is a close Defence partner of Australia).

Peter Fray

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