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Telecoms firms seek cheaper 5G airwaves to meet £2bn cost of ripping out Huawei kit

Huawei logo with WiFi router - The Telegraph
Huawei logo with WiFi router - The Telegraph

Telecom firms have urged ministers to slash the price they pay to buy 5G bandwidth so they can avoid hiking bills to cover a £2bn hit from ripping out Huawei equipment.

The lobbying comes after Chinese communications titan Huawei revealed it earned 454 billion yuan (£51bn) in the first half of 2020, up 13.1pc from a year earlier despite the coronavirus pandemic.

Some of the country’s largest mobile operators are asking ministers to intervene in Ofcom’s next spectrum auction, where they buy up ultra-fast 5G internet coverage. The firms want prices slashed, offsetting the steep cost of removing existing 4G and 5G equipment which has been estimated at almost £2bn.

Ministers are today expected to introduce a 2025 deadline for operators to strip out all Huawei equipment from their 5G networks.

Industry insiders say networks hope a drop in prices at the November 5G auction could help them avoid passing on the cost of removing equipment to millions of ordinary customers through higher bills.

Operators are hammering out the details of a proposed compensation package in the coming months, with one firm saying it would only charge customers for Huawei changes as a last resort.

What is 5G? | At a glance
What is 5G? | At a glance

The Huawei restrictions follow plans for new US sanctions later this year which will further limit Huawei’s access to US-designed microchips. They could cause supply issues for operators in Britain.

The Government is facing pressure from operators to provide them with financial compensation for the cost of removing Huawei kit, as well as other support including reduced prices as they continue to build 5G networks.

However, experts have warned that ministers will not be able to simply adjust the prices of the auction. They may instead have to formally ask for a reduction from telecoms watchdog Ofcom, which runs the process.

Matthew Howlett, of industry data firm Assembly, said: “Ofcom are keen to point out that they're independent of the Government and their approach to licencing spectrum is based on economics and awarding a scarce resource."

Ofcom said earlier this year that it doesn’t expect bidding for the next portion of the UK’s 5G spectrum to begin until November at the earliest.

The auction had been due to take place this spring but was pushed back by Covid-19 and following a threat of legal action earlier this year by O2.

James Barford, the head of telecoms research at Enders Analysis, said: “The upcoming spectrum auction might be an opportunity for the government to give some or all of this compensation without making a specific payment.”

However, he added that simply offering a percentage cut across spectrum prices would not be fair as operators face vastly different costs in ripping out Huawei equipment.

Huawei in UK
Huawei in UK

Under another proposal being considered, Whitehall could ask Ofcom to lower the annual licence fees it charges for use of the UK’s 5G spectrum.

Insiders on Monday said new restrictions on the use of Huawei kit could trigger a “gold rush” as telecoms businesses scramble to purchase enough alternative gear from the Chinese manufacturer's rivals to replace it.

5G base stations cost around £70,000, and suppliers including Ericsson and Nokia are likely to benefit from increased demand as operators seek their kit to continue building their 5G networks.