BT says Huawei rip-outs will cost it $658M over 5 years

BT owns the mobile network brand EE, which has been rolling out 5G. (BT)

Earlier this week the U.K.’s National Cyber Security Centre issued recommendations on the use of Huawei equipment in telecom networks, and BT said it expects the implementation of those recommendations to cost it about £500 million ($658 million) over five years.

Philip Jansen, Chief Executive of BT, said in the company’s earnings statement this week, "The security of our network is paramount for BT. 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 U.K.’s communications infrastructure. We are in the process of reviewing the guidance in detail to determine the full impact on our plans and at this time estimate an impact of around £500 million over the next 5 years.”

The government’s restrictions don’t explicitly name Huawei, but the restrictions exclude “high risk vendors” from core network functions and limit their presence in the radio access network (RAN) to a hard cap of 35%.

RELATED: U.K. allows limited Huawei role in 5G networks

Despite strong-arm demands from the United States to exclude Huawei from U.K. telecom networks, Prime Minister Boris Johnson chose a compromise solution as he tries to maintain a balance between his diplomatic relationship with the US and his desire not to cripple U.K. networks.

The U.K.’s National Cyber Security Centre also stressed the need for the country to diversify its equipment vendor pool and adopt open interoperable standards to encourage new entrants. Some vendors, such as Mavenir, see the championing of open standards such as O-RAN as a great opportunity.

RELATED: Mavenir sees Huawei ban as O-RAN opportunity

Of BT, a New Street Research note led by analyst James Ratzer said, “The main contributor to this £500m cost is the need to swap out existing Huawei 4G equipment at sites where BT wants to deploy 5G, particularly in urban areas. This swap-out is necessary because BT, in common with all other European telcos, is deploying a non-standalone (NSA) 5G network, which relies on the 4G network for key management and control functions. BT’s exposure to Huawei 4G though is one of the highest in the sector.”

BT owns the mobile network brand EE, which has been rolling out 5G.

New Street Research also noted that Vodafone UK has lower exposure to swap-out costs than BT. “Vodafone shares its UK network with O2, and O2 uses no Huawei in their access network, and Vodafone does not use Huawei in London,” states New Street. “Therefore they should be within the 35% caps without any historic 4G swap-out costs. However, the risk for Vodafone could be in other markets in Europe, where their use of Huawei equipment is higher. This however will depend on individual market rules.”