The Chinese telecommunications giant supplying equipment for New Zealand's ultra-fast broadband scheme has been banned from participating in Australia's national broadband network because of cyber attack concerns, according to the Australian Financial Review.
The AFR reports the Australia Government had banned Huawei from the country's broadband project because of fears of internet attacks "originating in China".
The paper said a Government official reportedly called Huawei Australia's chairman late last year telling him "not to bother tendering for any NBN supply contracts because they would not succeed".
Huawei is challenging the move "vigorously in public and by using diplomatic channels", according to the AFR.
"Huawei sources have also hinted that the Chinese government will retaliate strongly against Australia if the ban on the company's tenders is not lifted," the AFR reported.
Huawei has scored major New Zealand supply deals with Enable Services and Ultrafast Fibre Ltd, the Government's private partners for the ultra-fast broadband (UFB) scheme in Christchurch and the central North Island.
The fibre lines laid as part of the UFB scheme will offer 75 per cent of New Zealanders download speeds of at least 100 megabits per second by the end of 2019.
This is over 20 times faster than the average speeds enjoyed by many urban internet users in 2010.
Communications and Information Technology Minister Amy Adams said in a statement that the Government "doesn't comment on specific vendors".
"Network security is an issue we take seriously. The Government will work with all suppliers and operators to address any security concerns that may be identified, and is committed to working with operators and suppliers to protect the integrity and confidentiality of the UFB and RBI networks," Adams said.
Mr Key said he would not comment on the security issue but issues about the company had been raised and considered.
"We received good quality advice and we do the best to protect New Zealand businesses and consumers where we think that's necessary."
He said the UFB contract with Huawei began before Australia took its action against Huawei. However the Chinese company also had contracts in the UK and with others.
"We are comfortable with the current arrangements we have."
He said he was aware of Australia's actions but had a limited knowledge on the reasons for it.
Huawei signed an equipment deal last year with Chorus, which will aid in the rollout of fibre lines in the rural broadband initiative (RBI).
Huawei's technology was also used to build 2degrees' mobile infrastructure and last year it won a $140 million contract to extend 2degrees' network.
The Shenzhen-based company was founded in 1987 by Ren Zhengfei, a former officer in China's army and operates in more than 140 countries, touching a third of the world's population.
It opened offices in New Zealand in 2005.
Huawei appeared US media in December 2011 after reports its technology was being used by Iranian police to track down political detractors.
Huawei planned to scale back its operations in the country following the reports, according to the Wall St Journal.