In this June 15, 2018, file photo, people walk under the logo of Japanese internet company SoftBank Corp. at its mobile phone shop in Tokyo. Japanese technology company SoftBank Group Corp. will carry out an initial public offering of its Japanese mobile subsidiary, set for Dec. 19. (AP Photo/Shuji Kajiyama, File)

INTERNATIONAL – SoftBank Group plans to replace 4G network equipment from China’s Huawei Technologies Co with hardware from Nokia and Ericsson, Nikkei reported on Thursday, without citing sources.

The move comes at a time of heightened scrutiny of Chinese tech firms by the United States and some prominent allies over ties to the Chinese government, driven by concerns they could be used by Beijing for spying.

SoftBank, Japan’s third-largest telco, will also order equipment for its next-generation 5G network from the two European suppliers instead of Huawei, Nikkei reported.

A SoftBank spokesman said the report was “based on speculation and no decision has been made”.

Nokia and Ericsson are already big suppliers to SoftBank.

It also has the longest running relationship with Huawei among Japan’s top three telcos, but the firm has previously said that the amount of equipment it uses from Chinese makers “is relatively small”.

Replacing the 4G equipment, which Nikkei reported will be done over several years, is likely to be time-consuming and expensive, industry sources have said.

The Nikkei report on the supplier switch comes as SoftBank is preparing to list its telecoms unit in Tokyo on Dec. 19.

This week, SoftBank’s telecoms unit priced its IPO at an indicated ¥1 500 (R187.31) per share and said would sell an extra 160 million shares to meet demand, raising about $23.5 billion in Japan’s biggest-ever IPO.

The report also comes on the heels of Japan issuing a policy document on maintaining cybersecurity during procurement.

While Huawei was not explicitly named, sources have said that the policy document was aimed at preventing government procurement from the company as well as China’s ZTE.

Huawei has already been locked out of the U.S. market, and Australia and New Zealand have blocked it from building 5G networks amid concerns of its possible links with China’s government. Huawei has said Beijing has no influence over it.

Japan’s decision to keep Huawei out would add to the woes of the firm, whose chief financial officer was recently arrested by Canadian officials for extradition to the United States.

Reuters