Huawei Technologies has pledged not to pursue new business in Iran as the world’s second-largest telecom infrastructure vendor seeks to contain damage to its reputation in Western markets.

The rare move follows criticism especially in the US – a market in which the Chinese telecom equipment maker is struggling – that equipment Huawei sold to Iran’s state-controlled mobile operators allegedly helped the Iranian authorities locate and arrest dissidents and censor the news.

Huawei’s multinational competitors such as Ericsson and Nokia Siemens Networks have also been active in the Iranian market, but the Chinese company has been expanding there more rapidly over the past two years following political unrest. The company has close to 1,000 staff in the country.

Sources close to the company said it had held talks with United Against Nuclear Iran, an American pressure group which had called on Huawei to pull out of Iran.

The Wall Street Journal reported in October that Huawei had signed a deal earlier this year to supply Mobile Communication Co of Iran (MCCI) with products that could help track users’ locations. Huawei has denied this.

Last month, the company said it had won a contract to provide a mobile news delivery platform to MTN Irancell, the country’s second-largest mobile operator. Reports have said the service helps MTN censor the news, but Huawei denies it sells any equipment that can do this.

Western multinationals have faced fierce criticism in the past for allegedly helping dictatorships monitor or persecute their citizens, especially in Huawei’s home country. Cisco Systems, Huawei’s US rival, has been accused of helping the Chinese government build its massive internet censorship operation. Yahoo came under criticism after a Chinese dissident was arrested and jailed based on information gained from his Yahoo email account.

Huawei did not respond to questions on Friday on whether it would cut staff in Iran and whether its partial retreat was driven by hopes to improve its image in other parts of the world.

But the move – an exception for a company which has over the past 20 years aggressively grabbed business from global competitors in markets around the world – comes at a crucial time for Huawei.

As growth in its traditional core business of network infrastructure equipment is slowing, Huawei has identified enterprises and consumers as its two new growth markets, and is in the midst of recasting itself as a consumer brand.