UK says it will ban Huawei from 5G networks in major U-turn

The logo of Chinese company Huawei at their main U.K. offices in Reading, west of London, on January 28, 2020.

Daniel Leal-Olivas | AFP via Getty Images

The U.K. has announced that it will ban Huawei from its 5G networks, in a significant U-turn by the government that could significantly dent relations with China while appeasing the U.S.

Speaking in Parliament on Tuesday, U.K. Culture Secretary Oliver Dowden said mobile network operators in the country would be forced to stop buying equipment from Huawei by the end of the year. They will also be required to strip out Huawei gear from their infrastructure by 2027.

It’s a major reversal for the U.K., which in January gave Huawei restricted access to the country’s next-generation mobile networks. Under previous guidelines, mobile network operators were required to reduce the share of Huawei kit in non-core parts of their infrastructure to 35% by 2023.

But that decision was complicated by new sanctions imposed on Huawei by the U.S. in May. These restrictions mean the Chinese firm will no longer be able to source key chip equipment from trusted American suppliers. The U.K.’s National Cyber Security Center initiated an emergency review of Huawei shortly after the U.S. curbs were introduced.

Dowden said the move would delay the U.K.’s rollout of 5G mobile internet, which promises super-fast data speeds and increased network capacity. Banning procurement of new Huawei gear and reducing the Chinese vendor’s market share to zero by 2027 would result in an “accumulative delay” of up to 3 years and result in costs of up to £2 billion ($2.5 billion), he warned.

Tuesday’s decision is a significant blow to Huawei, which had been ramping up its investment into the U.K. with a new research and development center in Cambridge, England, and a push for developers at the start of the year to help it build an alternative to Google’s Play app store. Huawei was cut off from licensed Google software last year due to U.S. trade measures.

“This disappointing decision is bad news for anyone in the U.K. with a mobile phone,” Ed Brewster, a spokesperson for Huawei U.K., told CNBC. “It threatens to move Britain into the digital slow lane, push up bills and deepen the digital divide.”

Huawei urged the government to reconsider the move, adding it was “confident” the new U.S. restrictions “would not have affected the resilience or security of the products we supply.” The firm “will conduct a detailed review” of what the decision means for its business in the country, said Brewster.

UK-China relations

U.S. officials have warned of national security concerns around Huawei for years, amid worries that the Chinese vendor’s equipment could enable Beijing to spy on sensitive communications. Huawei has frequently denied such claims, insisting it is independent from the Chinese government.

Nevertheless, President Donald Trump’s administration has urged “Five Eyes” allies, which include Australia, New Zealand, Canada and the U.K., to block Huawei from their 5G networks as a result. While Australia went ahead with a ban in 2018, other members of the alliance — with the exception of the U.K. — haven’t yet taken such action.

Shenzhen-based Huawei is the world’s top telecommunications equipment maker. But it has been caught up in a tense geopolitical feud between the U.S. and China. More recently, that battle appears to have extended to include internet services, with Washington threatening to ban Chinese-owned video-sharing app TikTok last week.

Huawei reported its slowest first-half revenue growth in seven years on Tuesday, as the company continued to grapple with the impact of U.S. sanctions and the global coronavirus pandemic. The firm reported revenue of 454 billion yuan or $64.23 billion in first six months of the year, up 13.1% from a year earlier.

Tuesday’s move will inevitably hit Britain’s cell phone carriers. Three of the country’s top mobile network providers — BT-owned EE, Vodafone and Three — have already deployed 5G in their infrastructure. Executives at Vodafone and BT last week said it would take at least five years to swap Huawei telecoms kit out for another vendor’s.

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