Huawei to give up shares of its undersea cable subsidiary amid US blacklisting

Security policymakers in the US, Australia and Japan are increasingly concerned about the growing capacity of Huawei in undersea cable business

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Chinese telecoms giant Huawei plans to sell its stake in an undersea cable subsidiary.

Taking over Huawei’s shares in the subsidiary is Hengtong Optic-Electric, a Chinese optical communication network producer that is not blacklisted by the US. It announced that it had signed a letter of intent with Huawei last Friday regarding the deal of buying a 51% stake in the undersea cable company Huawei Marine, according to Hengtong Optic-Electric’s filing to the Shanghai Stock Exchange.

Huawei Marine is a Hongkong-based joint venture set up in 2008 by the Chinese telecoms giant and Britain’s Global Marine. Until now, Huawei held a 51% stake of the Hong Kong company.

Despite being a latecomer in the undersea cable business which is dominated by US, European and Japanese companies, Huawei Marine has already been involved in the construction of 90 projects and built over 50,000km of cable, including a trans-Atlantic cable linking Africa and South America–traditionally a US back garden–according to its official website.

Huawei Marine is expected to complete 20 new cables between 2015 to 2020, and security policymakers in the US, Australia, and Japan have become concerned about the growing strength the Chinese competitor, according to Nikkei Asian Review.

Hengtong Optic-Electric said it planned to buy the 51% stake via cash and share insurance but did not disclose when they first started the negotiation or the reasons behind the acquisition.

It would take Huawei out of the equation when it comes to the future of the up-and-coming undersea cable firm.

Last month, the US Commerce Department blacklisted Huawei, effectively baring US suppliers from dealing with the Shenzhen-based company without government approvals.