Deutsche Bahn Stands To Lose €400M If It Has To Do Huawei With Chinese Kit

Reliance on Chinese telecommunications equipment maker Huawei could end up costing Germany's state-owned rail operator Deutsche Bahn upwards of €400 million if a rip-and-replace order is issued.

According to internal documents obtained by German mag Der Spiegel, Deutsche Bahn, which has invested heavily in Chinese network equipment going back to 2015, faces delays in upgrade plans of five to six years should the Euro nation's government move forward with a ban on that kit. Up to 800 base stations would have to be replaced in Northern Germany alone, the document states.

The news comes just months after the rail operator awarded Deutsche Telekom - a telco that makes extensive use of Huawei equipment - a €64 million network modernization contract.

Chinese telecoms gear has been a source of controversy for years. The main concern being that, due to Chinese laws mandating the sharing of info with Beijing, Huawei could be forced to place backdoors in its equipment, allowing officials to spy on foreign nations. Huawei, for its part, has repeatedly denied these allegations, and said it abides by the law wherever it operates.

Germany is in a particularly precarious position, as the European Commission pushes for stiffer restrictions on the use of Chinese-sourced equipment in sensitive infrastructure. According to the Chinese embassy, Huawei accounts for nearly 60 percent of Germany's network equipment today.

Removing all this hardware would no doubt prove a costly endeavor, a fact highlighted by Germany's economy ministry in March. In a letter to a parliamentary economic committee, the ministry warned that ripping and replacing Huawei and ZTE equipment was likely to have a "significant impact on the operation of mobile networks and the fulfillment of coverage requirements."

And unlike the US, which reportedly received more than $5.6 billion in reimbursement requests from American ISPs and telecommunications providers, the way Germany's laws are written carriers could end up footing the bill to replace the equipment themselves.

Whether Europe's largest economy ultimately removes the Huawei equipment is still being discussed. As we've previously reported, the German government is still evaluating the security implications of the technology that powers its nation's networks and these findings could be crucial.

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European countries have had the authority to restrict or prohibit high-risk suppliers ever since the so-called 5G Cybersecurity Toolbox was approved back in 2020. However, as European commissioner Thierry Breton recently lamented, few nations have put this authority into practice.

"We cannot afford to maintain critical dependencies that could become a weapon against our interests," he said in June, arguing that EU member nations' failure to bar and eliminate Chinese equipment from their 5G networks posed "a major security risk and exposes the Union's collective security since it creates a major dependency for the EU and serious vulnerabilities."

Pressure to strip Chinese gear from national networks has increased in recent years. Last October, the United Kingdom joined the US and ten EU countries in nixing Chinese equipment.

Despite pressure from American and European leaders, not all nations are keen on the idea. Huawei's success in the 5G arena has come in part thanks to lower prices, which has made their equipment more accessible compared to competing vendors.

This week, the South African ambassador to the BRICS bloc, Anil Sooklal, said the nation would not comply with US efforts to ban Chinese telecommunications equipment, Bloomberg reported. 

Brazil, another member of the BRICS bloc, has also previously rejected pressure from US leaders to eliminate Huawei equipment from its networks. ®