(Bloomberg) -- Huawei Technologies Co. will be banned from the U.K.’s next-generation mobile networks, in a sweeping crackdown on the Chinese company that will delay 5G roll out and hit businesses with billions of pounds in extra costs.
Under the blueprint agreed by Prime Minister Boris Johnson, operators will not be able to add any new Huawei components to their 5G networks after Dec. 31 this year. All equipment made by the Shenzhen-based company that’s already installed will need to be removed from 5G infrastructure by 2027, the government said, confirming reports by Bloomberg News on Monday.
Ministers also warned operators to stop buying Huawei gear for their fixed full-fiber broadband networks. The government will consult with industry on a timetable for the tighter regime on fixed networks, but said it is expected to come into force within two years.
The ban on Huawei will cost U.K. operators as much as 2 billion pounds ($2.5 billion) to implement, and will delay the roll out of 5G networks by between two and three years, the government said.
‘Hostile Partner’
The decision to strip Huawei’s kit from British networks represents a major reversal by Johnson, and threatens to fuel a growing row between the U.K. and China at a highly sensitive time. China has warned Johnson will face “consequences” if the U.K. treats it as a “hostile partner.”
Johnson gave the green light to Huawei’s involvement in emerging mobile networks in January, subject to limits, but he came under intense pressure from U.S. President Donald Trump to change course.
The prime minister, his senior ministers and top security chiefs signed off on the plan at a meeting of the National Security Council on Tuesday morning. Culture Secretary Oliver Dowden later set out the details in Parliament. While 5G will be “transformative” for the U.K., “confidence in the security and resilience of the infrastructure it is built upon” is vital, he said.
“The government has decided it is necessary to ban Huawei from our 5G networks,” Dowden told lawmakers. “This decisive move provides the industry with the clarity and certainty it needs to get on with delivering 5G across the U.K.”
Implications
BT Group Plc and Three, which rely on Huawei more than other suppliers for their 5G networks, said they are studying the implications of the rules for their plans.
BT’s shares rose as much as 4%, making them the best-performing stock in the FTSE 100 Index on Tuesday, as the timetable for phasing out Huawei looked more forgiving than reports had suggested.
In May, the U.S. banned Huawei from sourcing microchips which use American technology, a move that forced British officials to reassess their view of the security and sustainability of using the company’s equipment in 5G networks.
“This was a significant and material change,” Dowden said, adding that the sanctions have “potentially severe impacts” on Huawei’s ability to supply equipment to the U.K.
Insecure Technology
The U.K.’s National Cyber Security Centre led a review which concluded the new U.S. sanctions meant Huawei would have to use potentially insecure technology, making 5G security risks impossible to control.
British operators now have a complex and expensive task to remove Huawei gear from their networks over the next seven years. Dowden warned the decision will inevitably delay the roll out of 5G networks in the U.K.
Britain’s move could prompt Canada to bar Huawei from its 5G networks, and focuses attention on Germany, where pressure is growing in the legislature to act against the company, said James Lewis, director of the technology policy program at the Center for Strategic & International Studies in Washington.
“It’s a win for the Trump administration,” Lewis said in an interview. “They had a plan. They carried it out. And that contributed to this.”
‘Closest Ally’
Some U.S. lawmakers have warned Huawei poses a danger to network security, and several welcomed the U.K.’s decision. Senator Marco Rubio, a Florida Republican, tweeted he was “very glad to see our closest ally move to secure their telecommunications networks.”
Johnson has faced demands from within his own Conservative Party to take a tougher line with Beijing amid concerns its equipment could be used by Chinese spies -- a charge the company denies.
In the short term, a ban on the company will inflame already heated relations between London and Beijing. Tensions have grown recently over China’s new security law in Hong Kong, a former British colony, and the handling of the coronavirus pandemic.
The China-Britain Business Council said it was “disappointed” by the decision and called on ministers to reassure businesses that the U.K. plans to “engage with China in good faith.” Chinese trade and investment supports as many as 149,000 jobs in Britain, it said, citing a study it commissioned by Cambridge Econometrics.
‘Gross Interference’
China’s official Xinhua News Agency fired back on Wednesday, calling the U.K.’s decision “ill-founded” and warned that the ban will “overshadow” cooperation between London and Beijing.
Last week Liu Xiaoming, China’s ambassador to the U.K., accused Johnson’s government of “gross interference” in domestic policy over Hong Kong and accused the U.K. of “dancing to the tune” of the U.S. over Huawei. Even in London, the prime minister may find his plans do not go far enough to satisfy some of his Conservative colleagues.
Conservative Iain Duncan Smith said that while he welcomes the decision, the government should shorten the seven-year timetable. “Let us bring it forward to five and let’s do it quickly,” he told Parliament.
His colleague, Bob Seely, said in a statement he too wants the government to move more quickly to a 2025 removal of the high-risk vendor. However, other Tories who might have rebelled appear to have been convinced by Tuesday’s announcement. Damian Green tweeted that the decision is “good” and said in an interview he would not vote against the government on the issue in the fall.
Huawei said it is disappointed by the ban and called on ministers to reconsider.
“It threatens to move Britain into the digital slow lane, push up bills and deepen the digital divide,” said Ed Brewster, a spokesman for Huawei. “Regrettably our future in the U.K. has become politicized -- this is about U.S. trade policy and not security.”
©2020 Bloomberg L.P.
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