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Huawei's global ambitions hit by AT&T phone distribution deal's collapse

Reuters  |  HONG KONG 

By Sijia Jiang

(Reuters) - Technologies Co Ltd's planned deal with U.S. carrier AT&Inc to sell its in the has collapsed the eleventh hour, people with knowledge of the matter said, in a blow to the Chinese firm's global ambitions.

A separate person familiar with the discussions said that security concerns had arisen, without elaborating further.

AT&was pressured to drop the deal after members of the U.S. Senate and intelligence committees sent a letter on Dec. 20 to the citing concerns about Huawei's plans to launch through a major U.S. telecom carrier, online site The Information reported.

said in a statement to on Tuesday that its flagship premium Mate 10 Pro - Huawei's challenger to the - will not be sold in the via a but only through open channels.

"The U.S. market presents unique challenges for Huawei, and while the Mate 10 Pro will not be sold by U.S. carriers, we remain committed to this market now and in the future," it said.

is the world's third largest vendor by volume after Electronics and Apple Inc, but it has a mere 0.5 percent share of the U.S. market, compared with 39 percent for Apple and 18 percent for Samsung, according to industry tracker

In the United States, where telecom carriers dominate the distribution channel by typically providing subsidies and special package deals, had been unable to make any significant inroads due to national security concerns.

was poised to announce a partnership with AT&to distribute its phones in the this year, said the people with knowledge of the matter, who declined to be identified as the talks were private. AT&declined to comment.

The flagship Mate 10 Pro that was to be introduced is Huawei's most high to date, equipped with its own that says process data much faster than those used by Apple and It was launched in in October with a price tag of 799 euros ($955).

Huawei's chief flagged Huawei's ambition to become a truly global brand in 2018 in his New Year address to staff, and also told The Information in an interview in late December that it planned to spend $100 million on marketing to raise brand awareness in the

But the collapse of the deal with AT&T, first reported by the Wall Street Journal, will mean that will likely struggle to make a hit of its there.

"This makes it very difficult for to get significant in the US as the open channels account for only about 10-11 percent of the market," said Mo Jia, referring to sales channels outside telecom carriers and vendors' own stores.

He said Huawei's proprietary may have presented a bigger regulatory hurdle for its U.S. market entry in the current political climate, compared with other Chinese vendors's entry strategy that relies on U.S. chip suppliers.

"Whatever they have spent on US marketing is a waste now, and the letdown this time may also deter other in the future," Jia said.

In 2012, and were the subject of a U.S. investigation that looked into whether the companies' equipment provided an opportunity for foreign espionage and threatened critical U.S. infrastructure - a link that has consistently denied.

($1 = 0.8363 euros)

(Reporting by in Hong Kong; Additional reporting by Stephen Nellis in San Francisco, Anjali Athavaley in New York, David Shepardson in Washington, D.C. and Sonam Rai in Bengaluru; Editing by and Muralikumar Anantharaman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, January 09 2018. 16:48 IST