Huawei, ZTE face new hurdles in U.S. market

China-based telecommunications companies Huawei and ZTE will meet more challenges when they pursue their foothold in the U.S. market, as a House report released on Monday labeled them as a threat to U.S. national security.

The U.S. House Intelligence Committee said in the report that China's Huawei, ZTE pose a threat to U.S. national security based on concerns over cyber-attacks allegedly traced to China.

As a conclusion to a yearlong investigation, the report recommended that U.S. government computer systems should exclude any equipment from the two firms. It also urged the Committee on Foreign Investments in the Unites States (CFIUS) to block acquisitions, takeovers, or mergers involving the two companies.

The panel also warned that U.S. companies considering doing business with the two firms should find another vendor.

"The findings of the House committee will not legally prevent Huawei and ZTE from operating in the United States, but it will make it extremely difficult for them to do business here," Edward Alden, senior fellow at Council on Foreign Relations, told Xinhua.

"It will send a clear message to U.S. companies that they should avoid entering into contracts or otherwise doing business with either company," he added.

"Huawei is a business in the business of doing business," William Plummer, Huawei's U.S. vice president of external relations, told Xinhua. The report "is unfortunate political distraction from very real issues related to cyber vulnerabilities on the global basis," he added.

Huawei made "32.4 billion dollars in revenues last year across 150 different markets, 70 percent of our business outside of China. Huawei is not going to jeopardize its commercial success for any government, period," he continued.

"The Committee is operating under a broad assumption that any Chinese company must have 'ties' sufficient to enable China's government to direct or control business operations, even including authority to require access to Chinese companies' telecom infrastructure equipment for purposes of espionage and sabotage of critical U.S. telecom infrastructure," ZTE said in a statement immediately after the U.S. House panel released the report.

"ZTE has been forthcoming in responding to this assertion. China's government has never requested such access to ZTE equipment; and ZTE expects China's government never to do so. If China's government were to demand such access, ZTE would be bound by U.S. law," said the statement.

The two Global leading telecom companies operate in over 140 countries. Huawei is currently serving 45 of the world's top 50 telecom operators, including Vodafone, Motorola, France Telecom and T-Mobile. ZTE is also servicing 500 telecom carriers across the world. But both companies hit an invisible wall when they attempt to expand their business in the U.S. market, the largest one in the world.