China's Huawei hit by last minute collapse of AT&T phone distribution deal

By Sijia Jiang

HONG KONG (Reuters) - A deal under which U.S. carrier AT&T Inc was to have sold smartphones made by Huawei Technologies Co Ltd has collapsed at the eleventh hour, people with knowledge of the matter said, in a major setback for the Chinese firm's global ambitions.

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

AT&T was pressured to drop the deal after members of the U.S. Senate and House intelligence committees sent a letter on Dec. 20 to the Federal Communications Commission citing concerns about Huawei's plans to launch consumer products through a major U.S. telecom carrier, online tech news site The Information reported.

Huawei said in a statement to Reuters on Tuesday that its flagship premium smartphone Mate 10 Pro - Huawei's challenge to the iPhone - will not be sold in the United States via a telecoms carrier but only through open channels.

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

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

The Mate 10 Pro, launched in Europe in October with a price tag of 799 euros ($955), comes with AI-enhanced chips that Huawei, the world's third largest smartphone vendor, says process data faster than those used by Apple and Samsung.

But the collapse of the deal with AT&T, first reported by the Wall Street Journal, will mean that Huawei will likely struggle to make a hit of its smartphones there as a U.S. mobile carrier would typically promote the products as well as provide subsidies and special package deals.

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

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(Reporting by Sijia Jiang 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 Edwina Gibbs)