Telefonica may seek damages in the event of Berlin imposing restrictions on using equipment from China’s Huawei as it rolls out next-generation 5G networks. Germany’s telecommunications industry heavily depends on Chinese companies, with Huawei supplying 60 percent of base stations and related infrastructure in its network. The country passed legislation in 2021 to beef up security standards but avoided an outright ban on Chinese firms that some Western nations have implemented. The country’s telecom operators have been urged to consider alternatives, such as Nokia or Ericsson, but the companies have rebuffed calls for them to switch out of Huawei.

The top manager of Telefonica Deutschland, the biggest mobile operator in Germany with over 45 million connections under its core O2 brand as well as other secondary and partner brands, including AY YILDIZ, Ortel Mobile, Aldi Talk, and Tchibo mobile, said the company could not accept any restrictions on the use of Huawei equipment. The exec added that the company was in regular contact with German authorities and stressed the need for consistency in planning for communications infrastructure security.

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China’s ambassador to Berlin warned of retaliation if Germany banned Huawei from the rollout of its 5G network, which showed heightened tension between the two countries. The envoy said political motives were driving the decision and would delay the service’s launch while calling on the German government to listen carefully to the rational voice in its country.

Huawei’s chief European representative said he was confident some European telecom companies would choose the Shenzhen-based firm to supply equipment for their 5G networks. The exec added that the firm also focused on growing its budding cloud business and still had access to U.S. chips despite trade restrictions.

A former Polish secret agent accused of spying for China’s intelligence services begins his trial in Warsaw on Wednesday as some states reconsider whether to exclude the Chinese firm from their 5G telecoms networks. The espionage case comes as the United States, China’s biggest trade rival, pushes for greater cybersecurity in the rollout of the next generation of wireless technology.

According to draft, lawmakers from Chancellor Angela Merkel’s conservative party were set to back a strategy paper that stops short of banning Huawei from building its 5G network in Germany. Merkel’s governing coalition partners are divided over the issue, with some wanting to shut out the Chinese firm on security grounds. The document is due to be published in early March. HSBC has urged Britain to avoid a Huawei ban, saying such a move would send the wrong signal to Beijing and could hurt its business with the Chinese government. The bank said a ban would make it harder for it to meet the requirements of the Chinese government to do business there. The HSBC board is due to discuss the issue later on Wednesday.