Spain has canceled a fiber-optic service contract with Telefonica due to the Spanish telecoms group’s use of equipment supplied by China’s Huawei. The Digital Transformation Ministry said on Friday it had scrapped the €10 million ($11.7 million) agreement, citing “digital strategy and strategic autonomy” as the reason. If Telefonica had executed the contract, it would have connected several government departments, including the Defense Ministry. Telefonica comes under pressure This cancellation is coming about a month after Emilio Gayo, the chief operating officer of Telefonica, reportedly said that the company was reducing its exposure to Huawei in Spain. It’s not a strange move, as many countries in the European Union are actively putting up local rules to reduce dependence and usage of Huawei’s infrastructure. The EU itself has pushed member states to remove Huawei and other high-risk vendors from sensitive networks due to espionage and sabotage concerns. Telefonica has already pledged to replace 5G Huawei infrastructure in Spain and Germany. However, the company continues to use some Huawei equipment in its commercial 5G retail networks in Spain and in overseas markets such as Brazil. The telecommunications company reportedly renewed a contract with Huawei late last year to deliver a 5G core network to retail customers in Spain by 2030. In early 2025, the company awarded Nokia the contract for 5G core for its service to companies and government institutions. European nations have local autonomy Spain’s move aligns closely with the stance of Germany, which has passed a nationwide ban on Huawei equipment in critical 5G networks. France and the Netherlands have also imposed strict rules to limit usage. However, the EU has stopped short of mandating a blanket prohibition, leaving national governments to interpret the Commission’s guidance. Different countries in the bloc have unique approaches to the matter. While some have outrightly banned the usage in the country, and this includes the UK, some have put some restrictions in place. The Spanish government’s decision to pull the plug on the Telefonica contract may send signals that the days of its permissive approach may be over or coming to an end sooner than later. Over the years, Huawei has repeatedly denied allegations that its technology poses a security threat and has insisted it complies with all regulations in the jurisdictions where it operates. Analysts say the decision is as much about geopolitics as about network integrity. Washington has lobbied European capitals to align with its hardline stance on Huawei, while Beijing has warned against politicizing technology supply chains. For Spain, a NATO member with close defense ties to the US, the optics of equipping its Defense Ministry with Chinese-made technology may have become untenable. The episode highlights the challenges European operators like Telefonica face. They have to phase out Chinese vendors to satisfy regulators while managing the costs and maintaining diversified supplier bases in global markets. Sign up to Bybit and start trading with $30,050 in welcome gifts
