Inside the US push to steer Vietnam's subsea cable plans away from China

By Francesco Guarascio, Phuong Nguyen and Joe Brock

HANOI (Reuters) - The United States is urging Vietnam to avoid Chinese cable-laying firm HMN Technologies and other Chinese companies in its plans to build 10 new undersea cables by 2030, sources with knowledge of the talks said.

Vietnam's five major ageing subsea connections that link it to the global internet have suffered repeated failures, making new cables a top government priority.

Since January, U.S. officials and companies have held at least a half-dozen meetings with Vietnamese and foreign officials and business executives to discuss the Southeast Asian nation's cable strategy, according to seven people involved in or briefed about the talks.

"It is a very hard lobbying," said one official who attended the meetings.

U.S. officials have also separately shared intelligence about possible sabotage of the country's subsea cables, said five people. Reuters spoke to 12 sources for this article, including Vietnamese officials, foreign diplomats and industry executives. All declined to be identified because of the sensitivity of the matter.

The U.S. and China are vying for influence in Vietnam, with both U.S. President Joe Biden and his counterpart Xi Jinping visiting last year and corporations from both countries investing heavily in Vietnam. Vietnam and China have openly discussed boosting digital "interconnections".

At the same time, subsea cables, which carry much of the world's data, have become central to the U.S.-Sino tech war and Washington, fearful of espionage by Beijing, has previously successfully lobbied to have HMN Tech excluded from another project, a Reuters investigation showed.

APTelecom, a little-known consultancy, has been part of the talks to persuade Hanoi, five of the people said. The meetings and APTelecom's role in them have not been previously reported.

HMN Tech and APTelecom did not respond to multiple requests for comment.

The White House declined to comment. Vietnam's ministries of information and technology did not respond to requests for comment. China's foreign ministry said the U.S. campaign "blatantly violated international rules and business operation models".

OPEN TO CHINA

Vietnamese authorities and state companies have so far shown openness towards working with China on cables, five of the sources said.

The meetings aim to convince Communist-ruled Vietnam that in the cable-laying industry, which relies on only four players globally, relative newcomer HMN Tech would be a poor choice, according to four people.

U.S. officials and APTelecom have made it clear that choosing cable contractors with less experience and with less access to critical components would discourage U.S. companies from investing in Vietnam, two people who attended the meetings said.

"They clearly singled HMN out" in the meetings, said one of the people who attended.

Washington considers HMN Tech an affiliate of Chinese tech giant Huawei and both are under U.S. sanctions over concerns that they are a threat to national security - a charge that Huawei has denied. HMN Tech has said it is an independent company.

APTelecom, founded in 2009, has a multiyear contract with the U.S. government to promote Washington's "Clean Network" initiative with foreign countries, including deterring investment with China, a cable industry source familiar with the situation said.

The company's website makes no mention of the government contract. Reuters was unable to learn when it was signed.

APTelecom also acts as a dealmaker for Western companies seeking sensitive foreign cable contracts, the source said. The company is partnering with Google and Australian telecommunications firm Telstra on a new subsea cable system connecting Pacific islands.

HMN Tech has only been active since 2008 compared to decades for America's SubCom, Japan's NEC and France's Alcatel Submarine Networks.

The Chinese company has mostly laid shorter cables, according to data from research firm TeleGeography.

SABOTAGE?

Vietnam's main undersea cables all had costly outages and faults - sometimes simultaneously - between end 2022 and early 2023, according to research group BMI. That prompted Hanoi to set more ambitious undersea cable targets this year.

Projected costs have not been announced but the effort would be one of the most significant expansions of undersea internet infrastructure by any emerging economy, said BMI analyst Niccolo Lombatti.

In at least two meetings with Vietnamese counterparts this year, U.S. officials shared satellite images and other intelligence that suggest the outages may have been caused by sabotage, five sources said.

Vietnam's ministries of information and technology concluded there was no definitive evidence and if it was sabotage, no clarity about who committed it, three sources said.

Reuters was unable to learn more about the intelligence suggesting sabotage.

U.S. telecoms firm AT&T, a member of the consortium that owns a cable connecting Vietnam to the United States, had at least two meetings this year with Vietnamese officials and companies over the cables, said three people briefed about them.

It is unclear whether AT&T coordinated with U.S. authorities. AT&T did not respond to requests for comment.

One Vietnamese official, who was briefed on talks Vietnamese authorities held with HMN Tech about the planned cables, said Beijing's offers were cheaper.

Vietnam's top private tech company, FPT, said last year it would invest in a branch cable linking Vietnam to an international cable to be built by HMN Tech. But two people briefed on the matter said there had been no progress on the plan.

FPT did not respond to multiple requests for comment.

In April, Vietnam's state-owned telecommunications firm, Viettel, and Singapore's Singtel announced a plan for a new cable from Southern Vietnam to Singapore that would avoid the large portion of the South China Sea claimed by Beijing.

That cable's tender has yet to be launched.

"Time will tell" who is winning the race to secure Vietnam's undersea cable contracts, a Hanoi-based diplomat said.

(Reporting by Francesco Guarascio and Phuong Nguyen in Hanoi, Joe Brock in Los Angeles; additional reporting by Khanh Vu in Hanoi, Ethan Wang in Beijing and Trevor Hunnicutt in Washington. Editing by Gerry Doyle and Edwina Gibbs)