A World Bank-led project declined to award a contract to lay sensitive undersea communications cables after Pacific island governments heeded U.S. warnings that participation of a Chinese company posed a security threat, two sources told Reuters.

The former Huawei Marine Networks, now called HMN Technologies and majority owned by Shanghai-listed Hengtong Optic-Electric Co. Ltd, submitted a bid for the $72.6 million project priced at more than 20% below rivals Alcatel Submarine Networks (ASN), part of Finland's Nokia, and Japan's NEC, the sources said.

The East Micronesia Cable system was designed to improve communications in the island nations of Nauru, Kiribati and Federated States of Micronesia (FSM), by providing underwater infrastructure with a far greater data capacity than satellites.