ORA Orange.

By Matthew Dalton 

WARSAW -- In the decade since arriving in Poland, Huawei Technologies Co. has established itself as a pillar of the country's telecommunications network and one of its most high-profile foreign corporations.

But in recent months, Polish authorities had quietly grown concerned that the nation's deep reliance on Huawei has exposed it to espionage threats from Beijing.

Those worries burst into the open Friday with the arrest of a Huawei employee here.

Authorities brought espionage charges against the man a Polish employee of the telecommunications conglomerate Orange SA. Both men are in jail, and their attorneys couldn't be reached for comment. Huawei said over the weekend it had fired the individual and his alleged actions "have no relation to the company."

In the wake of the bombshell arrest, Polish security officials are debating how to defuse any potential security threats related to Huawei without crippling their own telecommunications infrastructure, or angering Beijing. The case raises international pressure on Huawei over fears that the company could be used by Beijing to spy in the dozens of countries where it operates.

Polish officials said over the weekend they had been examining the security issues linked to the use of Huawei equipment for some time and were considering whether to restrict the company's ability to sell in Poland. The U.S. in particular has been pushing allies to exclude Huawei from supplying equipment for next-generation, or 5G, networks. The U.S. has said Huawei could be forced by Beijing to use its knowledge of its equipment to spy on or disable foreign networks. Huawei has said it is an employee-owned company that isn't beholden to Beijing.

Poland's membership in the North Atlantic Treaty Organization has heightened urgency surrounding the nation's relationship with Huawei. "The information and signals we receive from NATO lead us to want to issue a recommendation in the near future," Karol Okoński, Poland's top cybersecurity official, told Polish media over the weekend.

Limiting Huawei would have significant consequences for both Poland and the company. By some estimates, Huawei has nearly 50% of the Polish telecommunications infrastructure market, selling everything from routers to cellphone towers and network security services to Poland's four telecommunications operators.

Mr. Okoński said the authorities were examining how widely government agencies and officials rely on Huawei gear. "We check to what extent Huawei equipment was ordered and used in public administration, state companies, especially those belonging to the critical infrastructure," he said.

For Huawei, Poland represents one of its biggest markets outside China and a base of operations for its business across central and Eastern Europe. The Polish government is in the process of rolling out several major telecommunications projects that would represent a large chunk of business for Huawei. Orange SA and T-Mobile US Inc., two of Poland's carriers, have already chosen Huawei for 5G demonstration projects.

Huawei also is a major supplier of smartphones in the country. The company has snagged Poland's most popular athlete, soccer star Robert Lewandowski, as a brand ambassador, making Huawei instantly recognizable to many Polish consumers. Huawei held a 33.5% share of Poland's smartphone market, second to Samsung Electronics Co., in 2018's third quarter, according to research-firm IDC.

For carriers around the world, excluding Huawei is a tough sell. The Shenzhen-based company led the global telecom-equipment industry with 28% market share in 2018's first three quarters, according to research-firm Dell'Oro Group, with essentially no presence in the U.S. market. Some major carriers say Huawei's equipment for 5G is the best in the industry.

The espionage case is likely to amplify doubts that some Polish officials have long had about Huawei, at a critical moment for winning telecommunications contracts in the country.

"There will be many more question marks," said Krzysztof Szubert, a former senior official in Poland's Ministry of Digital Affairs.

Details of the charges against the two men remain murky. Mr. Okoński said the case concerns economic espionage, not potential security backdoors inserted into Huawei's equipment.

The executive who was arrested, identified as Wang Weijing, was responsible for raising Huawei's profile in Poland, serving as the company's public relations director for five years. He was often the public face of the company at conferences and events around Poland. In his most recent role, his job was to sell Huawei gear to government entities.

"They spent a lot of time building their reputation here," Mr. Szubert said.

Write to Matthew Dalton at Matthew.Dalton@wsj.com

(END) Dow Jones Newswires

January 14, 2019 06:06 ET (11:06 GMT)

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