Huawei defends its privacy record, calling AT&T snub a ‘big loss’

Huawei Technologies consumer chief Richard Yu Chengdong said the breakdown in talks to distribute its flagship smartphone through US phone carrier AT&T was a “big loss” to both parties, while defending the Chinese company’s track record in privacy and security protection.

It was supposed to be a moment of triumph for Yu to announce at the CES technology conference that the Shenzhen-based telecommunications giant has finally secured a partnership with a major US carrier to sell its flagship phone. A deal is important because more than 90 per cent of smartphone sales in the US are made through carriers.

After introducing the features of the Mate 10 to a packed audience in the cavernous Palazzo ballroom in the Venetian Las Vegas hotel for about an hour, he confirmed the deal with AT&T was off. Yu had texted the South China Morning Post on Monday, verifying the partnership talks had collapsed and that Huawei was “harmed again.” He declined to comment further when approached after the presentation.

“I know today that many people are waiting for me to announce the partnership with carriers or operators, many of you have seen [in] the newspapers that something is happening,” he said in his presentation at CES, without naming AT&T. “Unfortunately this time [we] cannot sell this phone through a carrier channel, but we still want to sell it on the open market and e-commerce channels. It’s a big loss for us but also for the carriers, and even a bigger loss for consumers because they don’t have the best choice in the market.”

Collapse of Huawei deal with AT&T ‘will threaten China-US trade ties

The consumer business, which includes smartphones, accounted for about 35 per cent of Huawei’s total revenues compared with 56 per cent for the carrier business, according to the company’s latest annual report. China was its biggest market, with almost half of the sales, followed by Europe, Middle East and Africa at 30 per cent, and rest of Asia at 13 per cent. The Americas, which includes the US, took up 8.5 per cent of sales.

Watch: Gal Gadot, Huawei’s brand ambassador in the US, teaches the crowd at CES to pronounce the tech giant’s name:

The partnership between Huawei and AT&T apparently fell apart late in the negotiations, with reports that AT&T had walked away under pressure from the US government, which reportedly expressed concerns about Huawei’s ties to the Chinese government and security agencies. Huawei employees interviewed said they learned of the break-up from the news on Monday.

It was déjà vu as Huawei was accused in 2012 in a congressional report accusing it of spying on Americans, a move that set back its plans to enter the US market. Back then, Huawei hit back at the report, calling it an exercise in China-bashing. This time, the company demurred. The only hint of frustration was when Yu described the Mate 10s privacy and security features, raising his voice to emphasise that Huawei had the “highest standard.”

“We are a company that is very simple, very transparent, open – that is our style. I believe that consumers will select Huawei, that carriers will select Huawei,” Yu said. “They need Huawei. Huawei can bring more value to carriers and more importantly to consumers in the US.”

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In his presentation, Yu took aim at Apple Inc. and Samsung Electronics, doing a feature-by-feature comparison of the Mate 10 with the iPhone X and Note 8. Even without a carrier partner, Huawei plans to sell its flagship model in the US through channels such as Amazon.com and Best Buy. The 128G version of the Mate 10 would retail for US$799 and consumers can place their pre-orders from February 4 to February 17.

The abrupt cancellation of the tie-up with AT&T is the latest sign of tensions between China and the US over trade and investment, with Washington calling for trade actions against China and tightening screening of Chinese companies, especially in the hi-tech sector.

Huawei is the second Chinese company facing a serious setback in the United States in a week, after the US Committee on Foreign Investment rejected Chinese firm Ant Financial’s takeover bid for US-based money transfer firm MoneyGram, citing national security concerns. Ant Financial is an affiliate of Alibaba, which owns the South China Morning Post.

The break-up with AT&T, if politically motivated as reported by the Information, would have broader ramifications for Huawei’s future plans to sell its 5G networking equipment to the US. While Huawei is a major supplier of telecommunications network equipment in Europe, the market there is still smaller than the US.

AT&T was pressured to cancel the deal after members of the US Senate and House Intelligence committees sent a letter last month to the Federal Communications Commission, citing concerns about Huawei’s plans to launch consumer products through a major US telecoms carrier, the New York Times and Information reported.

At CES, as Yu ended his address and walked backstage, Huawei flashed a last slide that said: “We are closer than ever towards US consumers. We are committed to US consumers as always.”