German government to consult further before taking Huawei decision: source

BERLIN (Reuters) - The German government will consult further with telecoms operators and vendors before deciding whether to let Chinese firms such as Huawei Technologies participate in building future 5G mobile networks, a senior source said.

A decision is unlikely within the next two weeks, the source added, after ministers discussed the matter last week against a backdrop of U.S. calls on its European allies to exclude Chinese vendors on national security grounds.

Some government and industry leaders have been hoping to achieve clarity on the ground rules for 5G before Germany fires the starting gun on the buildout of next-generation networks by auctioning spectrum in late March.

Work still needs to be done to address costs, feasibility and security measures, said the source, pushing back against reporting in the German business press that officials had hammered out a common approach.

Chancellor Angela Merkel has said Germany needs guarantees that Huawei would not hand data to the Chinese state before it can take part in building fifth-generation networks that would link everything from vehicles to factories at far greater speeds.

Huawei, the global networks market leader with annual sales exceeding $100 billion, faces international scrutiny over its ties with the Chinese government and suspicion Beijing could use its technology for spying, which the company denies.

U.S. Secretary of State Mike Pompeo drove home that message in Budapest on Monday, cautioning allies in central Europe that deploying equipment from Huawei would make it more difficult for Washington "to partner alongside them".

Germany's three telecoms operators - Deutsche Telekom, Vodafone and Telefonica Deutschland - use Huawei equipment in their networks and have warned that curbing their choice of vendors could be costly.

Deutsche Telekom has, for its part, proposed a series of technical and compliance measures to safeguard security, including setting up an independent laboratory to scrutinise all equipment used in critical infrastructure before it is deployed in the field.

It also called for network equipment makers to submit the source code that runs their equipment to a trusted third party. Under certain circumstances, an operator would be able to gain access to address any security vulnerabilities.

Further, it said legal obligations and liability for the security of critical infrastructure should be broadened to cover network vendors in addition to operators, as is the case now.

(Reporting by Andreas Rinke and Nadine Schimroszik; Writing by Douglas Busvine; Editing by Keith Weir)