Briefing: Huawei sells majority stake in undersea cable manufacturer

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Huawei to sell 51pc stake in undersea cable business after US trade blacklist – South China Morning Post

What happened: Huawei’s parent company has signed a letter of intent to sell a majority stake in its international undersea telecoms arm, which builds underwater cables that support transnational internet connections. The deal will see Hengtong Optic-Electric, a manufacturer of optical communication network products based in China’s eastern Jiangsu Province, take a 51% holding in Huawei Marine Technology. According to Hengtong’s filing to the Shanghai Stock Exchange, however, the deal has not been finalized, and the size of the acquisition remains unspecified. According to its website, Huawei Marine Technology has laid 50,000 kilometers of undersea internet cables across the world’s oceans, but accounts for a small part of Huawei’s overall business, making just $17 million in 2018, around 0.2% of the company’s total profits.

Why it’s important: Last month, the US Commerce Department added the Shenzhen-based telecoms giant to the ‘entity list‘, citing national security as its primary concern. The move effectively bans American companies from selling products to Huawei. It is unclear how Huawei’s telecoms business will fare after the ban, but the company claims its inclusion on the list is not a severe blow. The sale of its submarine cable arm could be a sign that Huawei is trying to minimize its business in telecoms infrastructure and diversifying towards new industries. Huawei’s global role in the development of communication networks has come under scrutiny as a result of Washington’s campaign, which aims to exclude the company from 5G network deployment. Finnish telecoms manufacture Nokia claims to have secured 42 commercial 5G contracts, two more than Huawei.