Huawei Early Ban Surprises Telecoms Industry

After much political wrangling, the UK government has ordered telecoms providers to stop installing Huawei equipment in the 5G mobile network, with an earlier deadline than expected of September 2021.

High Risk Vendors

The new Telecommunications Security Bill banning the Chinese firm aims to remove high-risk vendors from 5G networks, according to the Digital Secretary Oliver Dowden, and bans the Chinese firm from the network.

He also published a 5G Supply Chain Diversification Strategy to stop British dependency on a small number of telecoms vendors.

There have been ongoing attempts to exclude Huawei from the network over concerns of the company’s links to the Chinese state and potential national security threats but the new legislation imposes firm controls.

After international pressure, including from the US, the British government announced in July that Huawei would be completely removed from the entire network by 2027, and removed from the “core” network by 2023.

Early Deadline

Though maintaining existing equipment will still be permitted, the new deadline is far earlier than expected and the telecoms industry now faces an adjustment of deployment schedules of the Huawei equipment they have already purchased following concerns that they may stockpile equipment before the purchase ban comes into effect at the end of 2020.

Companies such as BT, Three and Vodafone will face large fines if they fail to comply with these security standards, potentially up to 10% of turnover.

The new legislation will be debated at a second reading this week, but if passed will grant the government unprecedented powers as well as a £250m investment into the diversification of the telecoms market, including establishing a National Telecoms Lab research facility and innovative open radio technology.

Rollout Delays

However, the Huawei ban will delay rollout and the industry estimates that it could result in additional costs of £2 billion.

Shares in both BT and Vodafone have both lost value this year. Vodafone have recovered some of the losses seen in March but they are still trading at 13% lower than the start of 2020.

BT have been impacted more significantly and shares are trading over 42% lower than at the start of the year.

The bill may provide clarity in the UK which could be good news for BT’s recovery, but Vodafone may continue to face uncertainty due to the international scale of the Huawei controversy.