The US or cash? Huawei asks Poland to choose sides

Huawei has put its financially favourable foot forward, suggesting Poland will only get a cash boost if the vendor is allowed to participate in the 5G bonanza.

The role of Huawei in European networks has been under scrutiny for a considerable amount of time, and while it does appear it will be safe in numerous markets, Poland is one which is still hanging in the balance.

According to Reuters, Huawei is prepared to invest roughly $793 million in the country as long as it is allowed to sell equipment to the Polish telcos. While this might be enough to force some politicians into switching on the green-light, Poland is an area where Huawei has found itself in a bit of bother recently.

Back in January, a Chinese employee of Huawei and a Polish national working for Orange were both arrested on spying allegations by Polish security services. Evidence was not produced at the time, though concrete evidence has not been needed to ban Huawei in the US, or in countries such as Australia.

In terms of the US, Poland has had a strong relationship with the country for some time. Polish–US relations were officially established in 1919 and the country has remained one of the most stable allies of the US since. This filters down to the general public also, with Poland one of the most consistently pro-American nations in Europe and the world.

You also have to factor in more direct threats from the US. In February, the combative Secretary of State Mike Pompeo effectively suggested Eastern European nations would have to choose between working with the US or Huawei.

Looking at the Polish economy, a fractured relationship with the US would be difficult. Poland is the 24th largest export economy in the world, with the vast majority of exports heading to nations in Europe. However, the US is the largest single market outside of Europe for Poland, accounting for 2.7% according to Observatory of Economic Complexity, a MIT project.

With the US leaning so heavily on European allies to ban Huawei, seemingly as a means of putting pressure on the Chinese Government, Poland might turn out to be an interesting battle ground. Of course, you have to consider the cash incentive from Huawei.

Poland is effectively the Eastern European home ground of Huawei. The firm employs roughly 900 people in the country and will have a positive impact with its Polish supply chain. With further investments planned in the country, the direct impact of £793 million will keep the Polish Government happy, but there will be considerable knock-ons in other parts of the economy.

Another consideration for Poland will be market competition. Polish telcos will need a suitable amount of competition to ensure investments in network infrastructure is as low as possible. When you consider ARPU on mobile users, the demands become much more evident.

Orange’s Polish business currently has 9.7 million subscribers, each generating roughly £5.67 a month in revenue. For Play, Poland’s largest MNO, just over 12 million subscribers generate £6.71 a month for data services. For Polish telcos to generate ROI, competition between the network infrastructure vendors is clearly needed; banning Huawei might have some difficult implications to stomach.

Huawei knows this of course and is playing an excellent move. Poland will have to make a decision before too long; persist with its relationship with the US or effectively help Huawei gain traction in Eastern Europe.