Huawei to Scale Back Business in Iran

The Wall Street Journal

BEIJING—Chinese telecommunications-equipment maker Huawei Technologies Co. said Friday it plans to scale back its business in Iran, where the company provides services to government-controlled telecom operators, in the wake of reports that Iranian police were using mobile network technology to trace and arrest dissidents.

Shenzhen-based Huawei will "voluntarily restrict its business development there by no longer seeking new customers and limiting its business activities with existing customers," according to a statement on the company's website. It said the company was making the move due to "increasingly complex situation in Iran," but did not elaborate.

The Wall Street Journal reported in October that as Western companies pulled back from the Iranian market in the wake of the crackdowns, Huawei won more contracts in the country. Iranian human-rights organizations outside Iran say there are dozens of documented cases in which dissidents were traced and arrested through the government's ability to track the location of their cellphones.

Huawei's move marks the first time a Chinese company has decided to scale back its business in Iran, increasing pressure on the country, according to Mark Wallace, president of United Against Nuclear Iran and a former U.S. ambassador to the United Nations. Iran is under global sanctions for allegations it is developing a nuclear weapons program. Iran has denied this.

"This is a significant milestone," Mr. Wallace said. "For the first time a major Chinese business is pulling back from Iran in the face of mounting international scorn for Iran's brutal regime."

Huawei said it plans to continue servicing its existing Iranian contracts. "For communications networks that have been delivered or are under delivery to customers, Huawei will continue to provide necessary services to ensure communications for Iran's citizens," the company statement said.

The Journal reported on Oct. 27 that Huawei had recently signed a contract to install equipment for a system at Iran's largest mobile-phone operator that allows police to track people based on the locations of their cellphones, according to interviews with telecom employees both in Iran and abroad, and corporate bidding documents reviewed by the newspaper. The company also has provided support for similar services at Iran's second-largest mobile-phone provider. Huawei noted that nearly all countries require police access to cell networks, including the U.S.

The Iranian government had stepped up surveillance of its citizens with the help of foreign technology after a bloody crackdown by authorities on antigovernment protests following a controversial election in 2009.

Huawei's announcement could help the company boost its image in the U.S., where Huawei executives complain the company has been unfairly restricted in the market, despite having forged partnerships with major operators across Europe and the Middle East, and in Canada, and rising quickly over the last several years to become the world's second largest provider of telecommunications equipment, after Sweden's Telefon AB L.M. Ericsson.

U.S. regulators have blocked Huawei's bids on major telecommunications infrastructure projects as well as acquisitions of American companies over security concerns, and the White House and Congress have both recently launched investigations into national security threats posed by foreign telecommunications firms, particularly worries that equipment from Huawei and other Chinese companies into U.S. systems could potentially be used to track or intercept communications.

Founded in 1987, closely held Huawei said earlier this year that it expects revenue to grow 10% in 2011 to reach $31 billion, slower than the 24% growth it saw in 2010, in part because of blocks on its expansion into the U.S.