The United States Government will require $4.98 Billion to replace the ZTE and Huawei Telecom equipment

The removal of equipment built by Chinese telecom giants Huawei and ZTE (000063. SZ) from U.S. networks will cost an additional $3 billion, bringing the total to $4.9 billion, the U.S. telecoms regulator informed Congress on Friday.

In a letter to Senator Maria Cantwell, chair of the Committee on Commerce, Science, and Transportation, Federal Communications Commission chair Jessica Rosenworcel stated that the Reimbursement Program will need $4.98 billion, representing a $3.08 billion shortage at the moment.

Companies would only be compensated for around 40% of the expenditures as Congress only budgeted $1.9 billion to support the removal procedure of Huawei and ZTE

Congress approved a bill in 2019 giving the FCC the authority to compel American telecom companies that receive federal subsidies to remove any potentially dangerous telecom equipment from their networks in exchange for payment.

“Absent an additional appropriation, the Commission will apply the prioritization scheme Congress specified,” Rosenworcel said in the letter, adding that the Commission would begin processing reimbursement claims “as allocations are issued in the coming days.”

To avoid losing access to an $8.3 billion government fund for the procurement of new equipment, U.S. corporations were forced to withdraw their equipment after the FCC classified Huawei and ZTE as risks. Congress only authorized $1.9 billion for the so-called “tear and replace” endeavor, raising concerns about the viability of the removal program. Companies are not compelled to finish the task until they have been paid.

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