Huawei Australia’s turnover halves on government ban of Chinese telco

Huawei’s earnings are crumbling across its Western operations from Australia to Britain, as government’s blacklist it from 5G networks.

Huawei Australia’s revenue have almost halved following the Morrison government’s decision to ban it from Australia’s 5G network. (Photo by Sean Gallup/Getty Images)

The federal government’s shunning of Huawei from Australia’s 5G rollout has hit the Chinese telecom behemoth’s profits, with the company saying the ban will hurt its carrier business for years to come.

Accounts lodged with the Australian Securities and Investments Commission show the Morrison government’s blacklisting of Huawei - which claims to be an employee-owned company not controlled by China’s communist regime - has wiped almost half the turnover of Huawei’s Australian subsidiary.

“Current year financial performance has continued to be affected by the Australian Federal Government’s announcement in 2018 around the 5G rollout,” said Huawei Australia director Lyu Qingchen.

“The adverse impact on the company’s financial performance from this announcement will continue in the subsequent years.”

In the year to December 3, 2020, Huawei Australia’s revenue sank 46 per cent to $355.87m, while pre-tax profit slumped 49.4 per cent to $17.1m. But Mr Lyu said the company remained committed to Australia.

“The company will continue to pursue its objective of increasing its profitability during the next financial year, with particular focus on enterprise and consumer business.

“However, the scale in the carrier network business will continue to decline as a result of the 5G government in 2018.”

It comes a year after it lost one of its high profile directors, former Victorian Labor premier John Brumby, who resigned three days after the US said it would prosecute the company on a raft of charges, including fraud and stealing trade secrets. Although Mr Brumby said his decision to step down was unrelated to the US legal action.

Huawei has been caught in the crosshairs of the US’s trade war against China, with the former Trump administration banning it from core infrastructure and preventing American companies from supplying it with chips and other technology.

This has sparked a greater effort from Western countries to bar the company - which People’s Liberation Army engineer Ren Zhengfei founded in a flat in Shenzhen in 1987 - and other Chinese telco providers on security grounds.

Four members of the Five Eyes intelligence network, the US, UK, Australia and New Zealand, as well as Japan and India have excluded Chinese telcos from their 5G networks.

The Australian government’s decision to block Huawei came a year before former US Secretary of State Henry Kissinger warned the US and China were in the “foothills of a Cold War’, with a potential conflict likely to be worse than World War I if the sparring between the two superpowers continues to escalate.

The earnings of Huawei’s UK arm have also been hit with turnover diving 27.5 per cent to £913.3m ($1.67bn) and profits falling 20.8 per cent to £29.7m, with the company warning the decision to block it would stunt digital growth.

“Political decisions have not only had a real impact on our UK business, the people we employ, and our customers, they will delay the 5G rollout and put Britain into the digital slow lane,” Huawei said in its accounts released over the weekend.

“Huawei’s global business has shown resilience and our priority in the UK remains working with our customers and partners to make sure the country’s networks remain reliable.”

India - the world’s second biggest phone market - announced its decision to ban Huawei last month, weeks before the anniversary of a deadly clash on its disputed border with China, which changed Narendra Modi’s approach to dealing with its fellow nuclear superpower.

Meanwhile, relations have rapidly deteriorated between Australia and China, which remains its biggest trading partner, with Beijing banning Australian products from beef, barley and timber to wine and lobster.

Last week Prime Minister Scott Morrison said he would push G7 leaders to back the restoration of a penalties system under the World Trade Organisation to curb China’s “economic coercion”.

“A well-functioning WTO that sets clear rules, arbitrates ­disputes objectively and ­efficiently and penalises bad ­behaviour when it occurs: this can be one of the most powerful tools the international community has to counter economic coercion,” Mr Morrison said.

“In my discussions with many leaders, I have taken great encouragement from the support shown for Australia’s preparedness to withstand economic coercion in recent times. The most practical way to address economic coercion is the restoration of the global trading body’s binding dispute settlement system.”