Britain’s decision to cap Huawei’s role in 5G will cost BT £500m (€590m), the telecoms company said, as it will need to remove some of the Chinese group’s gear from its network and tap pricier rivals.
The bill adds to the pressure on chief executive Philip Jansen, who wants to build gigabit fixed and mobile networks for the future while trying to shore up revenue and earnings in the short term.
Britain’s biggest telecoms group has already spent billions of pounds on sports rights and network upgrades to revive its fortunes and the financial impact of the Huawei ruling added to investor concerns about its financial performance.
BT’s shares, down 25% in the last 12 months, fell 6% after the company’s assessment of the Huawei impact and a weaker-than-expected 3% drop in third-quarter revenue which it blamed on regulation, tough competition and declines in legacy products. Core earnings fell 4% to £1.98bn, also slightly below expectations, although BT stuck to its full-year guidance.
The cost for BT to comply with the Huawei cap lays bare the financial stakes for other European countries and operators deciding whether to restrict the Chinese company.
The UK said this week it would allow high-risk vendors - in practice Huawei - into the non-sensitive parts of next-generation networks, defying US appeals to block the company on security grounds.
But London limited Huawei’s market share of the 5G network at 35%, excluded it from the sensitive core, where data is processed, and banned it from critical networks and locations like nuclear sites.
Mr Jansen welcomed the decision on Huawei, a long-standing BT partner, and said the security of the UK’s communications infrastructure should be the priority. But he said BT would have to switch out equipment and spend more on alternatives from Huawei’s rivals Ericsson and Nokia over five years to comply.
“Inevitably, because of the way that the network works on 4G and 5G, there will be some 4G boxes that are Huawei that will have to be eradicated,” he told reporters. “And then there’s also an assumption around what the pricing scenarios might be with alternative providers.” He said 5G roll-out targets would stay the same but there would be a lot of operational upheaval.
BT is rolling out 5G using the Chinese company’s radio equipment, although it is not using it in the core and is removing its gear from the core of its 4G network.