Italy vetoes 5G deal between Fastweb and China's Huawei - sources



* Rome has so far declined to announce bans on Huawei equipment

* But it is imposing costly conditions on 5G deals with Huawei

* Washington says Huawei may pose a security risks

* Huawei rejects U.S. charges, says it is ready for 'any scrutiny'

By Giuseppe Fonte and Elvira Pollina

ROME, Oct 23 (Reuters) - Italy has prevented telecoms group Fastweb from signing a deal for Huawei

to supply equipment for its 5G core network, two sources close to the matter said, the clearest sign yet Rome is adopting a tougher stance against the Chinese group.

The decision, made at a cabinet meeting late on Thursday, marks the first time Italy has vetoed a supply deal over 5G core networks with Huawei.

Visiting Italy in September, U.S. Secretary of State Mike Pompeo described Chinese mobile telecoms technology as a threat to Italy's national security.

Huawei strongly rejects the charges, and its Italian unit said it was ready to undergo any scrutiny to show that its technology was safe.

However at Thursday's meeting, the government used its special vetting powers to block Fastweb, the Italian unit of Swisscom SCMN.S , from implementing a supply deal with the firm in the most sensitive part of its fifth generation mobile network, the sources said.

"The government has vetoed the operation, asking Fastweb to diversify its suppliers," a senior government source told Reuters.

A source from the Prime Minister's office said Rome also wants to evaluate whether Huawei can play a role in 5G core networks.

Huawei declined to comment. No comment was immediately available from Fastweb.

While some U.S. allies, such as Britain, have announced bans on Huawei equipment in future telecoms infrastructure, Italy has so far declined to do so.

However, government and industry sources say Rome is de facto adopting a more marked pro-U.S. line on 5G deals.

Italy raised hackles in Washington last year when it became the first major Western economy to join China's international infrastructure project, the Belt and Road Initiative.

The tie-up has so far yielded little economic gain and the government has recently opted for increasingly stringent prescriptions over Chinese 5G suppliers, which is forcing companies to be more cautious about dealing with Huawei.

Measures imposed by the government on firms using Huawei equipment on their 5G network include restrictions on remote interventions to fix technical glitches and an extremely high security threshold, two industry sources have said.

Italy's biggest phone group Telecom Italia (TIM) TLIT.MI in July left Huawei out of an invitation to tender for a contract to supply 5G equipment for its core network, where sensitive data are processed.

Telecommunications companies operating in Italy have introduced get-out clauses in 5G deals with Huawei, allowing them to withdraw should Rome ask for costly requirements in exchange for its green light, industry sources said.
Reporting by Giuseppe Fonte and Elvira Pollina; Additional reporting and editing by Giselda Vagnoni; Editing by Jan Harvey

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