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    VOD   GB00BH4HKS39

VODAFONE GROUP PLC

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U.K. to Ban Huawei From Its 5G Network -- 2nd Update

07/14/2020 | 09:58am EDT

By Stephen Fidler and Max Colchester

LONDON -- The British government said it would bar telecom companies from purchasing new equipment made by China's Huawei Technologies Co. and gave them until 2027 to remove its technology from their 5G networks, a sharp about-face that marks a significant victory for the U.S.

The decision follows new U.S. restrictions on Huawei computer chips and comes amid a broader deterioration of relations between the U.K. and China, most recently relating to China's imposition of a new security law over the former British colony of Hong Kong.

Oliver Dowden, the British minister in charge of digital issues, told the House of Commons on Tuesday that new purchases of Huawei 5G equipment would be barred starting the end of this year and that the Chinese company's gear would have to be stripped out of British networks by the end of 2027. As recently as January, the U.K. said it could mitigate the risk of Huawei equipment in its networks.

The U.K is also launching a consultation on when to ban the purchase of Huawei equipment for the country's fiber-optic network. This will be followed by a transition period that isn't expected to exceed two years.

The move comes as U.S. pressure builds on European governments to shut Huawei out of their 5G networks. Senior U.S. officials, led by U.S. national security adviser Robert O'Brien and his counterparts from Italy, Germany, France and the U.K. are meeting in Paris this week.

The Trump administration ratcheted up its pressure on Huawei in May with restrictions that stop foreign semiconductor manufacturers whose operations use U.S. software and technology from shipping chips to Huawei without first getting a license from U.S. officials. British officials said this restriction raised questions about the quality of Huawei equipment in the future.

U.S. officials have long said Beijing could direct Huawei to sabotage or spy through 5G networks, which promise to provide superfast wireless speeds for coming technologies such as self-driving cars. Huawei and the Chinese government reject the charges.

Mr. Dowden said the move, which would be written into law in the fall, would delay the development of 5G by two to three years and cost up to GBP2 billion ($2.5 billion). He said the U.S. measure was "a significant material change" in the risk associated with using Huawei technology. The sector suffered from "a global market failure," he said, and was "dangerously reliant on too few vendors."

The U-turn followed a new review by the U.K.'s National Cyber Security Centre, part of the nation's GCHQ electronic-intelligence agency, triggered by the U.S. export ban in May. The swift policy reversal played out during the coronavirus pandemic.

Ed Brewster, a spokesman for Huawei UK, said the decision "threatens to move Britain into the digital slow lane." Urging the government to reconsider, he said the new U.S restrictions wouldn't have affected the security of the products supplied to the UK.

Mr. Brewster said Huawei, whose equipment will remain in 2G, 3G and 4G networks in the U.K., would conduct a detailed review of its business in the U.K. Hours before the announcement, John Browne, chairman of Huawei's U.K. board, resigned.

The decision is expected to fuel broader discussions about how the U.K., U.S. and other allies can wean themselves off Chinese technology and production, an issue underscored in recent months during the coronavirus pandemic by reliance on Chinese-made medical supplies for hospitals and caregivers.

Canada remains the lone country in the Five Eyes intelligence alliance -- which also includes the U.S., U.K. Australia and New Zealand -- that has yet to decide whether Huawei equipment can be used in its domestic 5G network.

The long phase-out of Huawei gear suggests the government has listened to British telecom executives who argued that imposing a rapid deadline to tear out Huawei gear from their networks would lead to coverage blackouts for customers, cost billions of pounds and delay the introduction of 5G.

Senior executives from Vodafone Group PLC and BT Group PLC told a parliamentary committee last week that a five-to-seven-year time frame would be needed to remove Huawei equipment to avoid disruption. Share prices of both companies rose after the announcement.

A group of Conservative lawmakers has been pressing the government to remove the equipment at a faster pace.

The providers also use equipment from Huawei's two biggest competitors, Sweden's Ericsson AB and Finland's Nokia Corp. The void left by Huawei's could be filled by smaller industry players, including South Korea's Samsung Electronics Co. and Japan's NEC Corp.

--Jenny Strasburg and Stu Woo contributed to this article.

Write to Stephen Fidler at stephen.fidler@wsj.com and Max Colchester at max.colchester@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
BT GROUP PLC 0.83% 201.6 Delayed Quote.51.19%
ERICSSON AB 0.28% 108.42 Delayed Quote.10.73%
NEC CORPORATION -1.79% 5480 End-of-day quote.-1.08%
NOKIA OYJ -0.32% 4.333 Delayed Quote.37.96%
SAMSUNG ELECTRONICS CO., LTD. -0.49% 80500 End-of-day quote.-0.62%
VODAFONE GROUP PLC 1.39% 129.46 Delayed Quote.5.57%
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Financials
Sales 2022 44 947 M 53 548 M 53 548 M
Net income 2022 2 597 M 3 093 M 3 093 M
Net Debt 2022 42 603 M 50 757 M 50 757 M
P/E ratio 2022 14,4x
Yield 2022 7,04%
Capitalization 36 096 M 50 236 M 43 004 M
EV / Sales 2022 1,75x
EV / Sales 2023 1,72x
Nbr of Employees 105 000
Free-Float 97,8%
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Mean consensus BUY
Number of Analysts 23
Average target price 2,03 €
Last Close Price 1,29 €
Spread / Highest target 108%
Spread / Average Target 57,2%
Spread / Lowest Target 7,71%
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NameTitle
Nicholas Jonathan Read Group Chief Executive Officer & Executive Director
Margherita Della Valle Group Chief Financial Officer & Director
Pierre Klotz Finance Director
Jean-Franšois M. L. van Boxmeer Chairman
Johan Wibergh Group Chief Technology Officer
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