MILAN, Dec 23 (Reuters) - Telecom Italia (TLIT.MI) has decided to retain Nokia (NOKIA.HE) as a supplier and reduce Huawei's (TLIT.MI) share of a planned purchase of equipment for building a 5G network, three sources close to the matter told Reuters, amid pressure to exclude the Chinese firm on security concerns.
The United States has lobbied Italy and other European allies to avoid using Huawei's equipment alleging it could pose a security risk - a charge Huawei has rejected. Italy has so far declined to ban Huawei outright.
Former national phone company Telecom Italia (TIM) at the beginning of this year was considering dividing a supply contract for the radio access network (RAN) part of its 5G build-out between Huawei and Sweden's Ericsson (ERICb.ST), sources told Reuters.
The RAN infrastructure includes the base stations and antennas that connect smartphones to the mobile network, and accounts for the bulk of the cost of a new network.
Finland's Nokia - which has previously been among TIM's mobile radio access network equipment suppliers - was set to miss out on the 5G RAN order, according to the sources.
But the agreement has since been reviewed.
"Ericsson will provide the bulk of the equipment, while Huawei and Nokia will get a 20-25% each", one of the sources said on Wednesday.
"The negotiations are still going on about issues including the percentage of reduction," another source said.
Huawei, TIM, Nokia and Ericsson all declined to comment.
The initial agreement which would have seen Nokia dropped was never publicly disclosed.
Even in countries where there is no ban on Chinese companies, telecom operators are wary of selecting Huawei and government and industry sources said Rome has de facto adopted a pro-U.S. line when it scrutinises 5G deals and urges companies to diversify their 5G suppliers.
In July, TIM left Huawei out of an invitation to tender for a contract to supply 5G equipment for its core network, where sensitive data are processed.
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