Huawei withdraws from 3Leaf deal

Chinese telecoms equipment giant Huawei has pulled out of its deal to buy bankrupt US server company 3Leaf Systems following a recommendation by the Committee on Foreign Investment in the US (CFIUS) that Huawei divest itself of its newly-acquired assets.

The $2m deal, which was agreed in May last year, sparked controversy when politicians and the CFIUS raised concerns about the security implications of allowing Chinese access to telecom and utilities systems.

Following the CFIUS finding, the case was due to be submitted to the White House for further consideration; as recently as last Friday, Huawei was adamant that it would wait for a decision from the American government before deciding on its course of action.

All of that changed Monday, when the company announced that it was voluntarily withdrawing from the deal. In a brief statement, Hauwei said that it was a “difficult decision, however we have decided to accept the recommendation of CFIUS to withdraw our application to acquire specific assets of 3Leaf,” adding that it remained “committed to long-term investment in the US.”

In the UK, reports in The Sunday Times that Huawei has offered to roll out a £50m mobile network in the London Underground as a “gift from one Olympic host nation to another” has raised similar security concerns in the intelligence and political communities. Huawei is reported to run networks for the Chinese military and founder-CEO Ren Zhenfei is a former soldier in the People’s Liberation Army. Huawei denies any links to the military and insists that the company is owned by its employees.