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The UK’s decision to ban Huawei will bring extra costs to operators which could impact their ability to bid for spectrum

Vodafone is calling on the UK government to cancel the upcoming 5G spectrum auction and instead simply allocate the spectrum licences evenly to the country’s four major operators for the reserve price.
 
The request follows the UK’s decision on Tuesday to ban the purchase of Huawei equipment from 2021, as well as phasing out existing Huawei kit in the country’s 5G networks by 2027. Vodafone has been very vocal about the additional costs that this decision will potentially cost the nation’s operators, saying before the decision was taken that it could cost “billions” to replace the equipment. 
 
Yesterday, BT revised its estimates for the cost of removing the Huawei equipment, suggesting that the long seven-year timeline for the process means that much of the tech would have needed replacing anyway, hence costs should not exceed those required by the government’s January restrictions on Huawei.
 
Nonetheless, Vodafone insists that the additional costs to deploying 5G could impact operators’ ability to bid in the upcoming spectrum auction.
 
“Return on investment in telecoms in the UK is amongst the lowest in the world,” Vodafone UK CEO Nick Jeffery told the Financial Times. “With additional money being taken out of the mobile industry from [Tuesday’s] decision on Huawei, now is the time to focus on ensuring operators can still afford to invest in the network this country deserves.”
 
This is not the first time Vodafone has advocated this approach to spectrum. Indeed, at the height of the UK’s coronavirus experience in April, Vodafone suggested that direct allocation could be the best way to help bolster the networks. At the time, Ofcom rejected the suggestion, and it seems unlikely that the UK’s decision on Huawei will sway them this time.
 
The auction process itself is also contentious for Ofcom’s refusal to ‘harmonise’ available spectrum. The network operators’ current spectrum holdings are incredibly fragmented, making their use less efficient, hence the operators want Ofcom to intervene and reallocate their spectrum into contiguous blocks. However, Ofcom has repeatedly stated that this is beyond their remit as a regulator and that the operators will simply have to make arrangements amongst themselves. 
 
 
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