March 29, 2017 7:58 pm JST

SK Telecom under heat to reject Huawei offer

Critics say Huawei equipment will allow China to spy on South Korea

KIM JAEWON, Nikkei staff writer

SEOUL -- South Korea's largest telecom provider SK Telecom is come under intense pressure to back away from an offer to use the network equipment of Huawei Technologies as critics say such technologies could be used to spy on the country.

SK Telecom said on Tuesday it was reviewing an offer from Huawei, along with other manufacturers, to provide equipment for the company's new base transceiver stations that would be set up this year.

"We are checking a wide range of issues in selecting the equipment manufacturer," said Kang Hyun-seong, an SK Telecom spokesperson. "We do not stick to any specific matter."

Conservative opinion leaders say embedding such technologies in SK Telecom's hardware poses a threat to national security. Huawei is widely known to have close links with the Chinese government.

"We should be careful about adopting foreign equipment that can turn out to be a 'Trojan horse,'" wrote Hwang Seong-joon, an editor, in Munhwa Daily, a rightwing evening newspaper. "If Huawei controls the network equipment of the nation's largest telecom company, technically it can wiretap conversations by phone."

SK Telecom is in a tight spot. Seoul's relationship with Beijing has deteriorated lately over the deployment of a U.S. anti-missile defense system called the Terminal High Altitude Area Defense, or THAAD. As punishment, China has banned tour groups from visiting South Korea, and suspended the operations of retail chain Lotte Shopping in the country, among other retaliatory actions.

U.S. Republican politicians had also waded into the spat, pressuring SK Telecom to abandon the Huawei deal. In December, three Republicans sent a letter to then Defense Secretary Ash Carter urging him to investigate security risks to American facilities and military forces in South Korea posed by Huawei's role in a new wireless network in the country.

But this wouldn't be the first collaboration between a South Korean telecom company and Huawei. In 2013, LG Uplus, a smaller rival of SK Telecom, adopted Huawei's equipment for its base transceiver stations in Seoul, Gangwon and Gyeonggi provinces for the first time. But LG Uplus was careful not to install the equipment near U.S. military camps, yielding to opposition from American forces.

Huawei, which did not respond to a request for comment, has been able to expand in South Korea thanks to its high-quality products and relatively low prices. The company signed a deal with the PyeongChang Winter Olympic Committee in December, becoming an official sponsor of the event, to offer telecom network equipment and services for the games to be held in February next year.

Shares of SK Telecom fell 3.07% to 252,500 won on Wednesday over worries that affiliate SK Hynix's bid for Toshiba's memory chip business could hurt its finances. SK Telecom is the largest shareholder of SK Hynix with 20.77%.

Asia300

SK Telecom Co., Ltd.

South Korea

Market(Ticker): KRX(017670)
Sector:
Industry:
Communications
Wireless Telecommunications
Market cap(USD): 18,044.74M
Shares: 80.74M
Asia300

Lotte Shopping Co., Ltd.

South Korea

Market(Ticker): KRX(023530)
Sector:
Industry:
Retail Trade
Department Stores
Market cap(USD): 7,629.79M
Shares: 31.49M
Asia300

SK hynix, Inc.

South Korea

Market(Ticker): KRX(000660)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 36,385.44M
Shares: 728.00M

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