UK’s Ban On Huawei 5G – Industry Reaction

Decision by United Kingdom to ban the use of Huawei 5G equipment by 2027 draws immediate reaction from operators and telecom experts

The order by the UK government that British mobile operators have seven years to remove all Huawei equipment from UK 5G networks, has drawn a wide range of reactions.

The United States and the Trump administration will welcome the decision, which they hope will lead to other nations including Germany, France and others to also ban the use of Huawei 5G equipment.

And Huawei rivals will also welcome the decision. Last month Arun Bansal, European president of Swedish telecoms giant Ericsson, said his firm would be capable of replacing all of the Huawei equipment in the UK’s 5G network, if the UK government opted to ban the Chinese vendor.

Local impact

Besides being a potential sale boon to the likes of Ericsson and Nokia, the UK’s decision could also have an impact or Huawei staff working in the UK.

The Chinese firm is said to a UK workforce of 1,600 people, and has research centres in Edinburgh, Bristol, Cambridge and Ipswich.

It is also uncertain whether construction of its $1.2 billion research facility in Cambridgeshire will still go ahead.

There is also bound to be a reaction from China’s communist government as well, as officials from that country have repeatedly warned of consequences for the UK of banning Huawei.

Expert reactions

And most experts agree the UK decision will give operators a bit of a headache on how to implement the Huawei ban from 2027.

“This will be a huge blow Huawei and a major headache for most if not all of the telcos,” noted Paolo Pescatore, tech, media and telco analyst at PP Foresight. “While, there are other network vendors who could pick up the pieces, it is unclear whether they are up to the task.”

“Established rivals like Ericsson and Nokia have been struggling and there’s a resurgence of players like Samsung Networks and Japanese players Fujitsu, NEC,” said Pescatore. “Smaller, fast growing and niche solution providers like Mavenir will all be keen to secure new business.”

“In essence, this will have a negative impact on 5G rollout,” noted Pescatore. “However, 5G remains in its infancy and the technology has yet to achieve its full potential. A long road awaits. The business model for 5G remains unproven. Telcos are wary given the need to balance to invest while margins are being squeezed.”

And Pescatore addressed concerns about the costs of replacing Huawei equipment.

“Who will fork out for these additional costs and disruption in any service issues that might arise, hopefully not the users!” he said. “Ultimately any additional costs always gets passed onto the user! More so at a time when margins are already squeezed and all players are seeing the economic impact from the pandemic. All eyes now on the next set of quarterly results.”

“Expect further backlash and ongoing debates given the geo-political battle between China and the West,” he added.

The issue of cost was also noted by another expert.

“The ongoing tug of war within the UK on Huawei’s involvement in its 5G networks has come to an end,” said Michael Downs, director of telecom security at Positive Technologies.

“Although the government isn’t stripping Huawei’s equipment straight away, the phased approach will have a marked effect on the telecoms industry, potentially costing billions because a lot of the major UK operators such as BT and Vodafone are already using its equipment not just for 5G but previous generation networks as well,” said Downs.

“Long term the decision to exclude Huawei cannot be solved with a solution as idealistically simple as just swapping it for an alternative vendor immediately,” said Downs. “There is also the additional cost of delaying deployments, as companies have already gone through the process of testing 5G equipment from Huawei. This whole process – including testing – will have to be started all over again. This will mean a more expensive network for the UK and a delay that could result in its national infrastructure being inferior compared to other countries”.

Telco clarity

Meanwhile the chair of the Internet Services Providers’ Association (ISPA UK) Andrew Glover welcomed the clarity the government has now given after months of speculation.

“The Government’s 5G announcement today provides some welcome clarity to our members who are rolling out networks and providing broadband to consumers and businesses across the UK,” said Glover.

“We look forward to further consultation with Government to determine the policy for fixed networks with a clear focus on ensuring that our members can roll out new gigabit-capable networks at pace,” said Glover. “As the Secretary of State emphasised today, supply chain interventions have a direct impact on the speed at which networks can be rolled out, so any new restrictions need to be counter-balanced with an appropriate level of support for the sector.”

“The Government has rightly made upgrading our digital communications infrastructure a priority, we now need to see a clear, ambitious plan from policymakers to help the companies that are leading this charge,” Glover concluded.

Another expert looked at the financial repercussions for mobile operators.

“This will ban the purchase of new equipment after 31 December, and existing gear will need to be removed from the networks by 2027,” noted Neil Campling, head of TMT at Mirabaud Securities. “ This is actually good news relative to the timeline talked about in the press over the weekend – which suggested it could be as short as two years.”

“Vodafone has said it would cost billions to rip out and replace Huawei and it would delay the rollout of 5G,” he noted. “This certainly feels like an exaggeration.”

“In February 2019, Vodafone had decided to pause any further developments of Huawei in the core across Europe,” said Campling. “The company had decided to replace Huawei in the areas deemed sensitive, such as the core, across Europe over a five-year timeframe, at a cost of approximately €200m.”