TPG Telecom’s $2 billion plan to build Australia’s newest mobile network looks to be in tatters because of the federal government’s ban on using equipment from China’s Huawei.

Both companies labelled the situation “extremely disappointing”, as TPG announced it will not proceed with building its own network.

TPG, which in 2017 paid $1.26 billion for mobile spectrum and has already spent $100 million of the $600 million construction cost, said on Tuesday it had already opted to use Huawei equipment before the government banned its inclusion in 5G networks on security concerns.

TPG blamed the August 2018 ban for halting work on what was supposed to be Australia’s fourth network after Telstra, Optus and Vodafone.

“The company has been exploring if there are any solutions available to address the problem created by the Huawei ban but has reached the conclusion that it does not make commercial sense to invest further shareholder funds (beyond that which is already committed) in a network that cannot be upgraded to 5G,” TPG said in a statement.

TPG, in conjunction with Vodafone, spent $263 million on 5G spectrum at auction last month and has committed to spending another $30 million on construction.

TPG had purchased equipment for 1,500 sites and has fully or partially completed the implementation of just over 900 small cell sites.

It said it did not yet know what it would do with its mobile spectrum and would update the market after weighing its options.

“It is extremely disappointing that the clear strategy the company had to become a mobile network operator at the forefront of 5G has been undone by factors outside of TPG’s control,” executive chairman David Teoh said.

The world’s largest maker of telecommunications network gear, Huawei has also faced restrictions in other countries including the US, which on Monday criminally charged the firm with stealing trade secrets, defrauding banks and obstructing justice.

Huawei has consistently denied acting on behalf of the Chinese government.

“TPG’s announcement is extremely disappointing for Australian consumers and businesses,” Huawei corporate affairs director Jeremy Mitchell said in a statement.

“As predicted the Australian government’s 5G ban on Huawei will lead to reduced competition and higher prices for Australia consumers and businesses.”

Mr Mitchell said customers will miss out on Huawei’s technological innovation.

A merger between TPG and Vodafone is currently being considered by the competition watchdog.

TPG shares dropped to $6.66 on Tuesday morning but recovered to close at $7.17.