Huawei to sell stake in undersea cable business: Reuters

Huawei is looking to sell off its stake in the company's undersea telecom cable business, which would mark its first major asset sale since the U.S. banned the use of some of its telecom gear in networks.

According to a Sunday story by Reuters, China's Hengtong Optic-Electric Co., which is an optical network products vendor, said in a filing to the Shanghai Stock Exchange that it had signed a letter of intent with Huawei to buy a 51% stake in Huawei Marine Systems Co.

The letter of intent was signed with Huawei subsidiary Huawei Tech Investment Co. Financial terms of the deal weren't available.

The potential sale comes as Huawei is under increased scrutiny in the U.S. and abroad over the use of some of its telecommunications equipment. Dating back to last year, the Trump Administration and U.S. security officials have said that Huawei poses a security risk because it could install "back doors" to gather intelligence for the Chinese government, which Huawei has vociferously denied. The U.S has pressured other countries, such as the U.K., to not use Huawei's gear as well for 5G networks.

According to a story earlier this year by The Wall Street Journal, U.S. security officials suspected that Huawei also posed a security risk for its Huawei Marine undersea cable business.

The U.S. Commerce Department imposed a trade band last month that threatens to choke off Huawei's supply chain to Google's Android operating system for phones and tablets, as well as silicon chips and components from various vendors, such as Intel and Arm.

For 5G, Huawei primarily competes with Nokia and Ericsson. Some telcos have said that Huawei's 5G technologies are farther along than Nokia's and Ericsson's, and less costly.

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Huawei is the world's largest telecom vendor and the second-largest smartphone maker behind Samsung. Divesting itself of its profitable undersea cable business may be an indication that Huawei is tightening its belt in order to focus more on selling and provisioning its core verticals.

Huawei Marine was formed in 2008 as a joint venture with Britain's Global Marine, according to Reuters. Since then, Huawei has built 31,293 miles of undersea cables and participated in 90 projects worldwide. Last year Huawei Marine connected Africa and South America with an undersea cable for the first time.

According to Huawei Technologies' first annual report, Huawei Marine booked a net profit of $16.66 million last year. Huawei Technologies gained majority voting rights on Huawei Marine's board in August with Global Marine retaining a 49% non-controlling interest, according to the annual report.