A cozy relationship with Huawei in the Trump era looks increasingly awkward for Deutsche Telekom while it generates a growing share of its profits in the US.
Time in the job hasn't made Europe's longest-serving telecom chiefs sound fonder of the region they call home. Börje Ekholm, now into his ninth year at Ericsson, derides Europe as a "museum" and seems happiest when he's in the US, where the Swedish vendor last year bagged 40% of its revenues and probably an even bigger share of its profits.
Timotheus Höttges has served more than 11 years as CEO of Deutsche Telekom, Europe's biggest telco, and similarly prefers the wilder and less regulated west. A passionate Americanophile, he quips about Europe's broken market structure like a moody cowboy with an incongruous German accent. "You can't ride a dead horse," he said at last year's MWC Barcelona. Unfortunately, his coziness with Huawei in Europe puts him on dangerous ground with China-bashing Americans who want to see the controversial supplier toppled.
Much like Ericsson, Europe's biggest mobile network equipment vendor, Deutsche Telekom owes a huge chunk of its sales and profits to the US market, whose contributions to the German telco's fat wallet have risen dramatically. In 2013, Deutsche Telekom's US subsidiary, formerly called T-Mobile USA, was a relative pipsqueak making just €18.6 billion (US$21.1 billion) in revenues and €3.9 billion ($4.4 billion) in adjusted earnings. Almost 70% of Deutsche Telekom's sales and more than three quarters of its adjusted earnings were generated elsewhere.
By 2024, there had been almost a complete reversal. What's now called T-Mobile US is a giant, responsible for 65% of Deutsche Telekom's €115.8 billion ($131.5 billion) in sales last year as well as €33 billion ($37.5 billion) in adjusted earnings, more than two thirds of the total.
There have been accusations in American dive bars and European tearooms that Ericsson and Deutsche Telekom rely on their lucrative US businesses to prop up the old continent. "I think it's well known that North America is typically good for our margins," said Per Narvinger, the head of Ericsson's mobile networks business group. It is thanks to those margins that Ericsson can get away with less profitable equipment sales to penurious Europeans, the argument goes.
Earning in the US to spend in China?
Without the high-flying T-Mobile US, Deutsche Telekom would be struggling. That is reflected in the performance of the German operator's share price. In the last five years, it has risen 155% and would be trading at an even higher level were it not for recent turmoil prompted by anxiety about tariffs. Short of US assets, no other big European telco comes close. Over the same period, France's Orange is up 10.2% and Spain's Telefónica just 2.5%, while Vodafone has fallen 35.6%.
At the same time, an extremely generous share of Deutsche Telekom's capital expenditure goes toward Europe and Germany, now a dense thicket of Huawei antennas. Capital intensity, spending as a percentage of sales, tracks at just 15% in the US but 19% everywhere else. This is much more than European telcos usually spend. Yet to report results for the year to March 2025, Vodafone had a capital intensity of 17% the previous year. Orange, in 2024, was on 16% and Telefónica as little as 13%. Suspicious American minds may wonder if US money is enriching Huawei.
Under Höttges, Deutsche Telekom has very evidently been a big customer of the Chinese vendor and one of the most reluctant to sever ties with it. Data gathered by Strand Consult, a Danish firm of analysts, showed that nearly two thirds of Deutsche Telekom's 4G network in Germany was served by Huawei at the end of 2019. Despite pressure from the European Union and the US, there has been no big switch to another vendor since then. By the end of 2022, almost 60% of Germany's 5G infrastructure came from Huawei, according to Strand Consult's data.
A workaround cooked up by Germany's telcos and its previous government did a good job of hoodwinking parts of the US media, which explains a New York Times headline last July of "Germany to strip Huawei from its 5G networks" (subscription needed and not, in this case, worth the money). In fact, Germany is doing no such thing. Operators will be allowed to keep all Huawei's products bar its configuration management system, a relatively small part of the radio access network (RAN), and they have until the end of 2029 to find an alternative.
Deutsche Telekom is collaborating with the German subsidiaries of Telefónica and Vodafone on the development of a system all three could use, as Light Reading revealed earlier this year. Experts are unconvinced it addresses the security risks previously identified. Huawei could (theoretically) slip malicious code into the basestation software it is still allowed to provide.
There has been heavy reliance on Huawei by Deutsche Telekom in other parts of Europe, as well. About two and a half years ago, after it had been sold by Deutsche Telekom to private equity, T-Mobile Netherlands switched from Huawei, previously the supplier for all its 3G and 4G RAN products, to Ericsson. But there do not appear to have been corresponding moves by subsidiaries in Austria and the Czech Republic, which have similarly bought all RAN products from Huawei and remain under Deutsche Telekom ownership. In Poland, too, there has been no sign of a big change in suppliers. In 2019, about 70% of Deutsche Telekom's Polish RAN was built with Huawei products, according to Strand Consult.
All this seems to prove the powerlessness of the European Union, whose "5G toolbox" documentation has for several years urged member states to flush out "high-risk vendors," a euphemism for Chinese suppliers. "I am very concerned about the fact that a significant number of the 5G sites across EU member states are still provided by high-risk suppliers," said Henna Virkkunen, the European Commission's vice president for tech sovereignty, in January. "As member states they have implemented the 5G toolbox very unevenly. Further measures may be needed."
Kowtowing to the US agenda
Strangling others with red tape is the usual mode of EU attack, but John Strand, the CEO of Strand Consult, agrees with Virkkunen about the lack of progress in parts of Europe. "Some countries have done nothing," he told Light Reading. Meanwhile, the US, subject once again to the art-of-the-deal management style of Donald Trump, is sounding antsy about the economic and technological ties between China and Europe, which imported €517.8 billion ($587.8 billion) worth of Chinese products last year versus just €333.4 billion ($378.5 billion) from the US. "The US wants to put pressure on its allies when it comes to China and there is no doubt this is very high on the agenda," said Strand.
Threatened by Trump with tariffs, European allies might not be in the mood for listening. The EU does, however, export a lot more to the US than it does to China. Last year, the value of exports to the US was €531.6 billion ($603.5 billion), while exports to China were worth about €213.3 billion ($242.1 billion). As much as €90 billion ($102.2 billion) of what the EU sent to China came from Germany in the form of cars and machine tools, explaining German reluctance to ban Huawei. But Deutsche Telekom's massive exposure to the US puts Höttges in an awkward position.
There has already been evidence of kowtowing to the US administration and its political agenda by T-Mobile US. Earlier this month, the operator scrapped much of its diversity, equity and inclusion (DEI) program to satisfy Republicans on a witch-hunt against what they see as a dangerous ideology. A day later, its proposed takeover of Lumos, a broadband service provider, was conveniently rubber stamped by the Federal Communications Commission (FCC).
Brendan Carr, the FCC's chair, this week told the Financial Times newspaper (subscription needed) that it was time for Europeans to choose between US and Chinese technology. He was talking specifically about satellite options. But it is not hard to imagine US officials in the current administration exerting wider pressure. In that environment, Höttges may struggle to justify his continued relationship with Huawei when he owes most of his profits to the US.
By extension, that is a problem for Germany's government, which still owns a stake in Deutsche Telekom of about 28%. Trump is notoriously transactional. There is a scenario in which Höttges and his shareholders start to notice that US government approvals needed by T-Mobile US have become much harder to obtain. Tariffs on Asian imports already risk driving up equipment costs ultimately borne by US telcos. If lobbying by companies recently persuaded Trump to ease off, he may in the future want something from T-Mobile in return.
Stripping out all of Huawei's RAN equipment in Germany would cost Deutsche about €1.1 billion ($1.3 billion), Barclays estimated in May last year. While the operator could easily shoulder that amount, it would naturally prefer to avoid the outlay and is probably worried about setting a precedent for countries like Austria and the Czech Republic to follow. Germany's government, meanwhile, will have nervous eyes on that €90 billion worth of exports to China.
But it's considerably less than the €161 billion ($182.8 billion) Germany shipped to the US in exports last year. And Höttges may be hedging. Deutsche Telekom has now begun to remove Huawei's equipment from about 3,000 mobile sites in Germany, around 8% of last year's total, and replace it with products from Nokia and Fujitsu. The deal reacquaints Nokia with Deutsche Telekom's German network after a long absence and could lead to more work at Huawei's expense in future. It might all depend on what Trump does next.
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