NCSC: Chinese Telecoms Firm ZTE is National Security Risk

Visitors pass in front of the ZTE Corp. booth at the Mobile World Congress in Barcelona Spain

The U.S. ban comes after ZTE failed to adhere to an agreement made with the government after it pleaded guilty a year ago to illegally shipping goods to Iran and North Korea and paid $1.19 billion million in fines. "Instead of reprimanding ZTE staff and senior management, ZTE rewarded them".

The U.S. government said Chinese telecommunications-gear maker ZTE (ztcoy) violated the terms of a sanctions settlement and imposed a seven-year ban on purchases of crucial American technology needed to keep it competitive. As part of the initial agreement, ZTE was allowed to continue to work with US companies, assuming it adhered to the rules laid out in the agreement. (NYSE: T). According to a report from Reuters at the time, security concerns were raised during the negotiations between Huawei and AT&T.

The Chinese telecommunication equipment maker was accused by the US Department of Commerce of making false statements during an investigation into sales of its equipment to Iran.

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"NCSC assess that the national security risks arising from the use of ZTE equipment or services within the context of the existing United Kingdom telecommunications infrastructure can not be mitigated".

The ban is a blow to the face to many USA companies that supply ZTE with components, including Qualcomm Corp., Lumentum Holdings Inc. and Finisar Corp., all of whose shares dropped after the announcement.

Yesterday, the Chinese firm was also blacklisted by the UK's National Cyber Security Centre (NCSC). In addition to these monetary penalties, ZTE also agreed a seven-year suspended denial of export privileges, which could be activated if any aspect of the agreement was not met and/or if the company committed additional violations of the Export Administration Regulations (EAR).

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The ban on supplying ZTE comes two months after two Republican senators introduced legislation to block the USA government from buying or leasing telecommunications equipment from ZTE or Huawei, citing concern the companies would use their access to spy on US officials. Its products, including smartphones, use such American parts as microprocessors from Qualcomm, glass made by Corning, and sound technology from Dolby. -China tensions over trade between the world's two biggest economies.

Secretary of commerce Wilbur L.Ross Jr said: "ZTE misled the department of commerce". ZTE was a regular purchaser from Qualcomm Inc., Intel Corp., Acacia Communications and lumentum Holdings Inc.

ZTE's main business is networking equipment where they are a major player alongside other mentionable companies such as Nokia, Ericsson, Huawei and Cisco. The technology bought by the company includes components central to its products. ZTE already sells both its branded and white-label smartphones via mobile carriers AT&T and Verizon in the US.

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The U.K.'s national Cyber Security Centre warns the telecommunication companies of the country that, "National risks from ZTE equipment and services can not be mitigated".

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