Swedish telecommunications company Ericsson has warned it might lose business in China because of Sweden’s decision to ban 5G equipment made by Chinese vendors Huawei and ZTE.

Stockholm-headquartered Ericsson said it “risks collateral damages from a weakened Swedish-Chinese relationship” because of the Swedish government’s decision to exclude Chinese vendors from the country’s 5G network last October.

Sweden’s Post and Telecommunication Authority said Chinese telecommunication vendors pose a national security threat, echoing decisions in the US, UK, Australia, New Zealand and other European countries. Huawei and ZTE have repeatedly denied allegations of spying or that they are a security threat.

“While Ericsson is invited to various ongoing tender processes in China, the final outcome remains uncertain and it is the company’s current assessment that the risk has increased that Ericsson will in those tenders be allocated a significantly lower market share than its current market share,” the company said in a risk factor statement published Monday.

Huawei has appealed Sweden’s ban and threatened retaliation against Ericsson and other Swedish companies.

Ericsson had been growing its presence in mainland China, securing deals with China Mobile, China Telecom and China Unicom. It currently has a market share of around 12% in China.

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By GlobalData

China’s size makes it a lucrative market for any telecoms company. By the end of 2020 the country accounted for 70% of the world’s 5G subscribers.

The potential loss of this market has seen Ericsson chief Börje Ekholm publicly attack Sweden’s decision to ban Huawei and ZTE. According to Bloomberg, he lobbied against the Swedish government’s ban on Chinese vendors from its 5G network.

Ericsson added that the “geopolitical situation” increases the likelihood of “further industry split, separation of global value chains and separation of global standards for mobile telecommunications.”

In June last year Huawei and ZTE were added to the US Entity List, preventing them from buying components from US companies without government approval.

In November 2020 the UK government announced it would bring forward its Huawei 5G ban to September 2021. From then telecommunications firms will no longer be allowed to install new equipment made by the Chinese tech giant.