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Why AT&T Abandoned Huawei Deal

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Mar. 5 2018, Updated 9:03 a.m. ET

AT&T was to be Huawei’s US carrier partner

A device distribution deal that AT&T (T) struck with China-based smartphone maker Huawei collapsed at the last minute. The deal involved AT&T becoming Huawei’s US carrier partner, thereby helping with the retail distribution of Huawei’s flagship Mate 10 Pro smartphone in the US. The Mate 10 Pro was launched in Europe in October at a price tag of 799 euros (or about $985). Apple’s flagship iPhone X has a starting price of $1,000 in the US and 1,000 pounds in the UK.

For Huawei, tying up with AT&T for Mate 10 Pro in the US was viewed as fitting with the company’s global ambitions. According to IDC, Huawei controlled 10.2% of the global smartphone market in 4Q17, making it the world’s third-largest smartphone vendor behind Apple and Samsung (SSNLF).

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Deal opposed on spying fears

According to a Reuters report, the AT&T-Huawei smartphone distribution deal collapsed because of security concerns. The report stated that AT&T was pressured into abandoning its deal with Huawei after US lawmakers wrote to the communications regulator citing the risk of Chinese spying.

Suspicion of Chinese technology

In addition to smartphones, Huawei is also a supplier to the telecom equipment market, where it controls a larger share of the market than Ericsson (ERIC) and Nokia (NOK). In 2012, Huawei was a subject of a US investigation into whether its equipment provided an opening for foreign powers to spy on America. The pressure on AT&T to drop its smartphone distribution deal with Huawei seemed to be grounded in America’s suspicion of Chinese technology and doubts of Huawei’s commitment to privacy.

AT&T, the number two US wireless carrier behind Verizon (VZ), would have provided much-needed leverage to Huawei’s penetration of the US smartphone market where Apple remains the dominant player.

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