The CEO of BT (BT-A.L) warned on Thursday that the UK’s restrictions on Huawei’s role in the country’s 5G networks could cost his company around £500m ($651m) over the next five years.
Philip Jansen said that while BT welcomed the “clarity” provided by Tuesday’s decision, the telecoms giant would need to review the government’s guidance in detail to determine its full impact.
The UK government announced on Tuesday that, while Huawei had been cleared to work on some parts of the country’s next-generation networks, restrictions would be put in place to limit potential national security risks.
It will be excluded from sensitive areas of the network, such as nuclear plants and military bases, and limited to a 35% market share of the “periphery” or non-core aspects.
“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 £500m over the next five years,” Jansen said in a trading update on Thursday.
His comments, the first to put some specificity on the potential financial impact of the Huawei decision, come after telecoms companies warned that a ban could cost them millions.
“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 UK’s communications infrastructure,” Jansen noted.
The CEO also warned that it would have to remove some Huawei equipment from its 4G networks.
“Inevitably, because of the way that the network works on 4G and 5G there will be some 4G boxes that are Huawei that will have to be eradicated,” he said.
BT said on Thursday that sales fell by 3% in the nine months to the end of 31 December. Underlying pre-tax profits also fell 3% in the period, to £5.9bn.
Shares in BT fell by more than 4% on Thursday morning.
“BT delivered results slightly below our expectations for the third quarter of the year, but we remain on track to meet our outlook for the full year,” Jansen said.
“The government’s decision on Huawei’s role in the UK’s 5G network was always going to leave someone worse off. BT thinks it’s going to cost them an extra £500m. It’s likely the regulator will try to limit the amount that gets passed onto the consumer, so BT may end up taking a lot of it on the chin,” said Will Ryder, an equity analyst at Hargreaves Lansdown.