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Canadian telcos may need to fight to get Huawei equipment compensation

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Canada’s telecoms operators may be in for a fight to get compensation if the government bans Huawei’s equipment.

Ottawa is currently deciding whether to follow its allies such as the UK and Australia in banning Chinese vendor Huawei’s telecoms equipment.

Reuters reports that Ottawa’s government doesn’t appear to be willing to offer compensation if Huawei’s equipment is banned.

“I’m not sure there is a solid legal case that we would have to compensate for making a proper national security decision,” said Reuters’ government source.

Relations between Beijing and Ottawa have been rocky since Canada arrested Huawei CFO Meng Wanzhou on fraud allegations. In expected retaliation, China detained Canadian businessmen Michael Spavor and Michael Kovrig and recently charged them with espionage.

The US has led pressure to ban Huawei’s gear, citing national security concerns.

No major operator in the US uses Huawei’s equipment, but smaller rural telcos which have used the vendor’s cost-effective gear are being offered compensation from the federal government to replace it.

US telecoms regulator the FCC has estimated the cost of American operators replacing equipment from the likes of Huawei and ZTE to be in the region of $1.8 billion. However, Congress is yet to approve the funds to reimburse the operators.

FCC chairman Ajit Pai said in a statement earlier this month:

“I once again strongly urge Congress to appropriate funding to reimburse carriers for replacing any equipment or services determined to be a national security threat so that we can protect our networks and the myriad parts of our economy and society that rely upon them.”

Following a multi-year security review, the UK originally ruled in January that it would permit Huawei’s equipment. Then relations with China deteriorated rapidly over disputes around matters such as Hong Kong, the coronavirus outbreak, and the detention of Uighur Muslims in barbaric “re-education” camps.

While it was expected that the UK would change its mind and ban Huawei’s equipment, further US sanctions on the company provided the country with the reason it needed.

The US’ sanctions prevent Huawei’s access to American technology. After another security review, the UK decided the recent developments increased the security risk and decided to ban the purchase of Huawei equipment from 31st December—with a deadline for removing existing gear set for 2027.

The UK has since launched consultations with its close allies – particularly those within the Five Eyes security relationship (which includes Canada) – to fund and procure alternatives to Huawei’s equipment.

We’ll have to wait for Ottawa’s decision on whether it will also ban Huawei’s equipment, but Canadian telcos may want to prepare to fight for compensation.

(Photo by Zdeněk Macháček on Unsplash)

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U.S. to start blocking TikTok and WeChat downloads Sunday

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The U.S. will begin blocking the distribution of the Chinese apps TikTok and WeChat on Sunday, the Department of Commerce said Friday.

Commerce said in a news release that U.S. mobile platforms will be prohibited from distributing the apps, meaning new downloads will be blocked.

But TikTok will not disappear entirely on Sunday. The app will still work for at least a few more weeks. Commerce said that crucial services that TikTok relies on, such as internet hosting and transit services, will not be prohibited until Nov. 12 — pushing the deadline to after the election.

WeChat, however, faces the full ban on Sunday, which could render the app almost useless.

The statement gives TikTok a reprieve as it continues to negotiate a deal in hopes of staving off the full ban.

“The real shut down would come after Nov. 12 in the event that there is not another transaction,” Commerce Secretary Wilbur Ross said in an interview on the Fox Business Network. “So it’s very different how the two are being handled and that reflects the quantitative and the qualitative differences between the two apps.”

Google did not immediately respond to a request for comment. Apple declined to comment.

A TikTok spokesperson said in an emailed statement that the company is “disappointed” with the decision.

“We will continue to challenge the unjust executive order, which was enacted without due process and threatens to deprive the American people and small businesses across the U.S. of a significant platform for both a voice and livelihoods,” the company said.

On Twitter, Vanessa Pappas, interim global chief of TikTok, responded to Instagram head Adam Mosseri, who tweeted that a ban on TikTok would be bad for “Instagram, Facebook, and the internet more broadly.”

“We agree that this type of ban would be bad for the industry,” Pappas tweeted. “We invite Facebook and Instagram to publicly join our challenge and support our litigation. This is a moment to put aside our competition and focus on core principles like freedom of expression and due process of law.”

The apps were the subject of an executive order from President Donald Trump in early August in which Trump said the apps posed a threat to national security.

The new deadline adds more tension to the negotiations currently happening between TikTok’s parent company ByteDance and U.S. technology company Oracle. The two companies have been in talks about a deal to mollify the president’s concerns.

On Thursday, the two companies reached an agreement on a deal that would stop short of Trump’s demand that TikTok be sold to a U.S. company. Instead, TikTok would become a global company based in the U.S., with Oracle taking responsibility for TikTok’s U.S. operations and its handling of user data, according to two people familiar with the arrangement who were not authorized to speak publicly.

That deal still needs the approval of Trump and Chinese authorities.

Trump said at a news conference Friday that the White House could still approve a deal that would turn TikTok into a U.S.-based company while entrusting Oracle with oversight of U.S. user data.

“I think it could go quickly,” he said, while noting that the U.S. would still need assurances of “total security” from China. “Could go very quickly. Could go very, very fast.”

Oracle did not immediately respond to a request for comment.

TikTok has amassed about 100 million monthly U.S. users, making it one of the only rivals to social media giants Facebook, Twitter and Snapchat. The app provides an easy way for people to record short snippets of video and put music or sounds to them. The app’s popularity, particularly among younger Americans, has already spurred its own generation of celebrities.

But its ownership by a Chinese tech company has been a point of contention among U.S. politicians who have expressed concern that China’s government could demand the user data of millions of Americans. That data could then be used for espionage purposes, but security experts have warned that data security is a problem that goes well beyond TikTok or apps that are owned by Chinese companies.

While TikTok has a higher profile in the U.S., WeChat is widely used by Chinese Americans. The app is primarily a messaging service but includes a wide variety of functions including a payment system and social media. In China, WeChat is almost necessary for daily life, where it can be used for everything from paying for taxis to playing video games.

Tencent, the Chinese company that owns WeChat, said in a statement that it is reviewing Friday’s announcement and still hopes to find a way to operate in the U.S.

“The restrictions announced today are unfortunate, but given our desire to provide ongoing services to our users in the U.S. — for whom WeChat is an important communication tool — we will continue to discuss with the government and other stakeholders in the U.S. ways to achieve a long-term solution,” the company said.

If it goes into effect, the Commerce edict would also mean TikTok will be unable to update its apps for American users, preventing the company from fixing any newly discovered security flaws or bugs.

That could create more insecurity, according to Whitney Merrill, a former lawyer for the Federal Trade Commission.

“A ban like this sets a very dangerous precedent. Any ban preventing further updates to that app, will ultimately harm users in unintended ways,” she said. “The developers will be unable to patch security vulnerabilities, leaving an insecure piece of software on many people’s phones.”

“This runs counter to concerns about security and data collection since it’s not really addressing either in a thoughtful, reasoned way,” she added.

Daniel Castro, vice president of the Information Technology & Innovation Foundation, a think tank funded by tech companies and some government agencies, offered a similar assessment.

“The Trump Administration has provided no evidence that a ban on WeChat and TikTok is necessary to address a national security threat,” Castro said in an emailed statement. “Instead, the actions announced today put consumers at risk by cutting them off from software updates, including necessary security updates.”



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China’s National Science Academy Vows to Close Tech Gaps in 10 Years

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China’s national science academy pledged Wednesday to close the country’s gaps in certain advanced technologies over the next 10 years, especially for those key materials that rely on imports from the United States, in an effort to counter Washington’s tech decoupling with Beijing.

Bai Chunli, president of the Chinese Academy of Sciences (CAS) said during a press conference hosted by the State Council, China’s cabinet, that the academy will use all of the resources at the academy’s disposal to concentrate on plugging gaps in those technologies, which include aircraft tires, bearing steel and lithography machines, among other key technologies and materials.

He said that the academy has established a number of task forces assigned to take a “warrior’s oath” in tackling some core technologies.

The pledge came days after President Xi Jinping said Friday at a symposium with Chinese scientists that “certain key and core technologies have been controlled by others and China relies on imports for some key components, parts and materials.”

Read the full story here

Contact reporter Lu Zhenhua (zhenhualu@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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Is Fuel Tech (NASDAQ:FTEK) Using Debt Sensibly? – Simply Wall St News

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Legendary fund manager Li Lu (who Charlie Munger backed) once said, ‘The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.’ When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Fuel Tech, Inc. (NASDAQ:FTEK) does use debt in its business. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can’t easily pay it off, either by raising capital or with its own cash flow. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company’s use of debt, we first look at cash and debt together.

View our latest analysis for Fuel Tech

What Is Fuel Tech’s Debt?

The image below, which you can click on for greater detail, shows that at June 2020 Fuel Tech had debt of US$1.56m, up from none in one year. But it also has US$8.25m in cash to offset that, meaning it has US$6.70m net cash.

debt-equity-history-analysis
NasdaqGS:FTEK Debt to Equity History September 18th 2020

How Strong Is Fuel Tech’s Balance Sheet?

The latest balance sheet data shows that Fuel Tech had liabilities of US$5.37m due within a year, and liabilities of US$2.06m falling due after that. Offsetting this, it had US$8.25m in cash and US$5.73m in receivables that were due within 12 months. So it actually has US$6.55m more liquid assets than total liabilities.

This luscious liquidity implies that Fuel Tech’s balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is just as strong as misogynists are weak. Succinctly put, Fuel Tech boasts net cash, so it’s fair to say it does not have a heavy debt load! There’s no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Fuel Tech’s ability to maintain a healthy balance sheet going forward. So if you’re focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Fuel Tech had a loss before interest and tax, and actually shrunk its revenue by 62%, to US$20m. That makes us nervous, to say the least.

So How Risky Is Fuel Tech?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Fuel Tech had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$4.3m of cash and made a loss of US$11m. While this does make the company a bit risky, it’s important to remember it has net cash of US$6.70m. That means it could keep spending at its current rate for more than two years. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn’t produce free cash flow regularly. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet – far from it. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Fuel Tech , and understanding them should be part of your investment process.

If, after all that, you’re more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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