Spark said this afternoon it had been notified by GCSB Director-General Andrew Hampton that it cannot use Huawei gear for its pending 5G mobile network upgrade.

Latest: Not a ban - Andrew Little offers hope for Huawei, but Spark dubious

The telco's announcement preempted any official statement from the government, though the GCSB and its minister, Andrew Little, later confirmed the development.

The decision represents a stark change in direction. For years while he was in power, former Prime Minister and GCSB Minister John Key actively encouraged our phone companies to use gear made by the Chinese company, founded by former People's Liberation Army officer turned billionaire entrepreneur Ren Zhengfei.

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Under the Telecommunications (Interception Capability and Security) Act 2013 or TICSA, technology used by Spark, Chorus, Vodafone, 2degrees and other network operators for upgrades to be vetted and approved by the security agency.

The Director-General told Spark today that he considers Spark's proposal to use Huawei 5G equipment in Spark's planned 5G RAN would, if implemented, raise significant national security risks, the telco says.

"Under TICSA, this means Spark cannot implement or give effect to its proposal to use Huawei RAN equipment in its planned 5G network," Spark says.

Tech-specialist lawyer Rick Shera said this is the first time TICSA has been used to block telco supplier.

The GCSB's apparent move comes after reports on Friday that the US was pressuring allies to drop Huawei.

While American suspicion of Huawei is longstanding - it pre-dates President Trump - previous efforts have focussed on keeping the Chinese company out of the US. Now, it's broadening its battle lines.

US officials are reportedly worried about the prospect of Chinese telecom-equipment makers spying on or disabling connections to an exponentially growing universe of things, including components of manufacturing plants.

The Wall Street Journal quoted an un-named US official who said, "There are additional complexities to 5G networks that make them more vulnerable to cyberattacks."

Spark says it has not yet had time to review the decision in detail.

"While we are disappointed with this decision, we are confident that the decision will not affect our plans to launch Spark's 5G network by 1 July 2020, subject to the necessary spectrum being made available by the New Zealand Government," Spark says.

GCSB Director General Hampton says, "I can confirm the GCSB, under its TICSA responsibilities, has recently undertaken an assessment of a notification from Spark. I have informed Spark that a significant network security risk was identified."

Hampton says he won't comment further at this stage.

At Spark's annual general meeting on November 2, Spark managing director Simon Moutter made an impassioned speech in support of Huawei, saying the company should be allowed to bid for 5G upgrade business unless the government could supply "incontrovertible proof" that the company was a security threat.

For its part, Huawei sought to defuse the controversy by saying it would only bid to put gear on 5G cellsites (the RAN or Radio Area Network), not the "core" or brains of a 5G network. Last week, Spark and Huawei went live with a 5G trial that they said proved the RAN could be isolated.

While the US and Australia has long-standing bans on Huawei, former New Zealand Prime Minister John Key was an active booster of the Chinese company, encouraging companies involved in the Ultrafast Broadband (UFB) rollout to consider its gear as a quality, cost-competitive auction.

Beyond the implications for New Zealand's trade relationship with China, today's decision could mean fresh scrutiny of the Huawei hardware that is sprinkled through the UFB and Rural Broadband Initiative (RBI) rollouts as well as Spark, Vodafone and 2degrees' networks. Telecommunications Users Association head Craig Young earlier warned the cost and disruption of ripping it all out would be considerable.

Huawei technology has been central to 2degrees' network since the telco launched a decade ago. Last week, director of corporate affairs and wholesale Mat Bolland told the Herald that there had never been any proof tabled that Huawei was a security threat.

Today Bolland said the decision was a blow for competition.

"Although we've not had a discussion with the GCSB on how that impacts our plans for 5G, we are seeking clarity [on whether 2degrees can use Huawei gear]," Bolland said.

"Our comments on the importance of multiple vendors to deliver price competitiveness still stand, so if this announcement has a similar impact on 2degrees it will be a real disappointment for competition. 2degrees is, however, committed to building a 5G network."

A Huawei ban would leave only two big telco infrastructure providers to bid for 5G work - Nokia Networks and Ericsson - which would make the market less competitive, Bolland said. Resulting price increases would ultimately be passed on to the consumer.

Huawei significantly undercut the incumbents when it internet the network infrastructure market in New Zealand 10 years ago.

Spark embraced Huawei for its 4G network after Alcatel-Lucent's debacle with its 3G network upgrade, branded "XT."

Huawei NZ deputy CEO Andrew Bowater argued that his company had a policy of full cooperation with the GCSB. As in the UK and Canada, no issue had ever been raised with its technology he told the Herald last. Now, that's changed.