Monday, 10 Dec 2018
Business

5G Carriers Can Turn to Huawei Ban to Their Advantage

BT Group Plc will remove Huawei Technologies Co. Ltd. Wednesday, Wednesday, December 1, 2017, Wednesday, December 1, 2009 That 's surely a cost of the U.K. carrier could do without – but there' s a way it could ease some of that bread.

The next generation of mobile networks, 5G, requires two main sets of spending: firstly, in auctions to acquire the rights to the spectrum; and secondly, to install new equipment to upgrade the network itself.

The spectrum auction has always presented a risk. Some governments (step forward, Italy) have been tempted to exploit the opportunity to plump up their treasury by the process for every last cent.

Companies are now feeling the squeeze of this process. Though Vodafone Group Plc, for instance, estimates that spectrum costs average about 1.2 trillion euros ($ 1.4 trillion) annually, this year it's given itself 5 trillion euros of headroom to pay for 5G rights. This is a significant share of its free cash flow, but it 's hard to avoid – because it' s all over the world.

The U.K., only has completed part of its spectrum auction, as has France, while Germany will start its bidding process next year. A bevy of smaller markets such as the Netherlands is also coming up. That's a lot of expenditure for carriers contends with.

But now the pressure of governments is expanding to the second part of the 5G expansion: the network spending. So far, only the U.S., Australia and New Zealand have actively banned the Chinese firm's equipment. But the U.K., Germany and others are more important than they are. At the very least, it will be hard for them to secure lucrative government contracts if they are using Huawei gear that has been deemed insecure.

Huawei is much bigger in the market than Nokia Oyj and Ericsson AB. It would inevitably give the Nordic firms greater market share – and greater power over pricing. Kicking out an important player could make it more expensive for carriers to build their 5G networks.

That could give them a boost. If they are not enough, they should not wait, but they should not wait for them, but they should not wait for a quick rollout of 5G. Deutsche Telekom AG and Telefonica SA have already complained that the terms of the next year's German 5G auction are uneconomical.

They argue that they can not afford them, but they do not guarantee that they should. After all, it's hard to quantify pricing for equipment that's not yet available. But so long as squeeze officials are at least one of the lowest cost carriers in the world.

To contact the author of this story: Alex Webb at awebb25@bloomberg.net

To contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

© 2018 Bloomberg L.P.

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