(Bloomberg) -- Huawei Technologies Co. cut loose a sales director arrested in Poland on suspicion of espionage, moving swiftly to distance itself from a case that may crystallize fears the telecoms giant helps Beijing spy on Western governments.
Chinese’s largest technology company fired Wang Weijing, who was responsible for sales to public sector clients, saying the incident has brought Huawei “into disrepute,” without elaborating. The smartphone maker, which has repeatedly denied charges of espionage itself, took action before judges had time to hear the defendant’s plea.
Huawei, which generates more revenue than Alibaba Group Holding Ltd. and Tencent Holdings Ltd. combined, has become a target of intensifying scrutiny across Western countries from the U.S. to Australia and New Zealand. Several carriers are now shunning its equipment over concerns the products may leave a backdoor for Chinese intelligence agencies. Huawei’s rejected all such accusations, saying its products are safe.
The Poland arrest could have "a very significant impact" on Huawei’s business as Europe is a key revenue contributor for Huawei, said Brock Silvers, managing director of Kaiyuan Capital, which holds no investment in Huawei. "Regardless of how the allegations against Wang are ultimately resolved, it seems likely that Huawei’s important European business will suffer in 2019."
The arrest comes as Huawei becomes a lightning rod for America’s fears about China’s economic and technological ascendancy. Polish authorities detained Wang and a former high-ranking official with Poland’s Internal Security Agency who also worked at mobile carrier Orange Polska SA. Evidence shows both men conducted espionage against the country, Stanislaw Zaryn, a spokesman for Poland’s secret services chief, said in a statement.
Huawei’s quick firing of Wang shows the company is trying to distance itself from whatever actions he may have been involved in, according to Adam Ni, a visiting fellow at Strategic & Defence Studies Centre at Australian National University.
“2019 will be a year of reckoning for Huawei in the E.U. as E.U. countries become increasingly skeptical of Huawei’s operations," said Ni. "This Polish case is the latest in a stream of bad news for Huawei for it’s worldwide operations, particularly relating to its connection with the Chinese intelligence and military."
U.S. President Donald Trump’s administration has been pushing allies to block Huawei from telecom networks amid a wider dispute over trade with China. When Zaryn tweeted the arrests in English, he included links to the Twitter accounts of the U.S. Department of State, the FBI and CIA.
Huawei said on Saturday it had nothing to do with Wang’s alleged actions, and that it complies with all applicable laws and regulations in the countries where it operates. But Warsaw is now considering formally recommending caution toward the company, and potentially excluding Huawei from its information technology market, Polish cyber security chief Karol Okonski told RMF Radio.
China is highly concerned, the Ministry of Foreign Affairs said in a statement within hours of arrest news breaking on Friday. “We are asking the related country to deal with the case fairly based on laws” and protect the legitimate rights of the people, it said.
The arrest is an unexpected twist in a saga that came to a head in December, when finance chief Meng Wanzhou -- the eldest daughter of Huawei-founder Ren Zhengfei -- was arrested in Canada at Washington’s behest. She now faces extradition to the U.S. on charges of conspiracy to defraud banks and violate American sanctions on Iran.
Her detention -- she’s now living under restrictions in a million-dollar home in Vancouver -- was regarded back home as an attack on one of China’s foremost corporate champions. The backlash comes at a critical juncture for a company with ambitions of leading the global rollout of 5G technology. Its recent woes also complicate the trade talks as the world’s two largest economies try to avoid an escalation that would hammer the global economy.
Germany is also weighing whether to restrict the role of Huawei in building the country’s telecom infrastructure, which would follow in the footsteps of restrictions in Australia and New Zealand. The head of Britain’s MI6 said last month the government needs to decide whether to ban the company and Czech President Milos Zeman said China may be preparing to retaliate after authorities there issued a warning about Huawei. He cited investments by Volkswagen AG’s Czech unit, Skoda Auto AS, in China as well as a PPF AS pact with Huawei to build a 5G wireless network, as potential targets.
Poland, a member of the European Union, counts on the Americans for security. While there’s little to suggest a political motive in Wang’s arrest, the Warsaw government is a staunch U.S. ally and the country is a prototype of Trump-style nationalism and protectionism. Poland relies on the EU for money, and U.S. troops are stationed on its soil. The European Union and the North Atlantic Treaty Organization should find a common approach toward Huawei, Polish Interior Minister Joachim Brudzinski said in a radio interview on Saturday.
“Europe is facing a challenge when it comes to dealing with Huawei and it shows that the continent doesn’t have the ability to be autonomous,” said Solange Ghernaouti, head of the Swiss Cybersecurity Advisory and Research Group. “Europe is either dependent on China or the U.S.”
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