UK’s Huawei compromise to cost BT £500 million

For the most part, telecoms companies in the UK breathed a sigh of relief at news of the government’s decision on Tuesday not to ban Chinese super-vendor Huawei. BT was certainly one of them, having previously written to the government, alongside Vodafone, urging them not to ban the key equipment supplier.

 

"We therefore welcome and are supportive of the clarity provided by government around the use of certain vendors in networks across the UK and agree that the priority should be the security of the UK’s communications infrastructure,” said BT CEO Philip Jansen (pictured).

 

However, the government’s decision does not mean smooth sailing when it comes to 5G for the UK’s incumbent operator. 

 

The government’s stipulation that Huawei and other “high risk” vendors be restricted to a 35% market share will have significant implications both for telcos’ existing network infrastructure and future relationships with vendors. The UK government currently estimates that Huawei has a market share of 44% and reducing this to 35% will be a costly endeavour for many. 

 

BT has not revealed exactly how much Huawei tech is being used for its 5G network, but a spokesperson confirmed "it is more than 35%”. As a result, BT’s estimates suggest that reducing and replacing Huawei’s presence in their network could cost them around £500 million over the next five years. 

 

Nokia and Ericsson appear to be the primary beneficiaries of the government’s decision, with companies like BT now likely to turn to them to replace the removed kit. Given the limited alternatives to Huawei, there are fears that operators could face additional costs of up to 20% for equipment.

 

It should be noted, however, that some estimates suggest that completely banning Huawei would have done orders of magnitude more damage to the UK telecoms industry; one study (albeit one funded by Huawei) calculated that an additional investment of $1 billion a year would be required in the event that Huawei were excluded entirely from UK networks.

 

In a further statement, Jansen also noted that more clarity was needed on the government’s proposed rollout of nationwide fibre broadband.

 

“Boris’s objective of full fibre to the whole country by 2025 is possible. It’s just very, very hard. And we have no time to waste,” said Jansen, adding that if the situation is not clarified soon then the target could well be missed.

 

Jansen estimated the required step-up in fibre construction could cost £400–600 million per year.