Long-standing relationships have left some operators particularly exposed to the cost of vendor restrictions, with most governments so far disinclined to offer support
Operators seek compensation for the removal of Huawei equipment: Bouygues Telecom and SFR have launched legal action against the French Government over costs incurred in the removal of Huawei equipment from their networks, which was mandated in 2019. The operators (which are more reliant on Huawei than rivals Free Mobile and Orange) are seeking financial compensation to support them to change the antennas and deploy 5G services, with Huawei’s 2G/3G/4G kit incompatible with the technology of other vendors such as Ericsson and Nokia. Bouygues Telecom believes it will need to spend €82m on the enforced ‘rip and replace’ process, which will require it to replace 3,000 antennas by 2028. With more than 8,000 antennas to uninstall by the same deadline, SFR expects to face a cost burden of well over €100m.
France is not alone in imposing vendor restrictions: In February 2021, the Conseil d’Etat dismissed appeals by Bouygues Telecom and SFR against the Government’s order to remove Huawei technology at ‘strategic locations’. Such legislation is not certainly unique to France, with several governments imposing vendor restrictions in recent years. For example, Canada has prohibited the use of new 5G equipment and managed services from Huawei and ZTE, while existing 5G equipment and managed services supplied by the two Chinese vendors must be removed or terminated by 28 June 2024. The UK excluded Huawei and ZTE from its existing and future 5G infrastructure, via the Telecoms Security Act (TSA). The Government has estimated a £2bn cost to the industry of the rip and replace scheme, as well as a potential delay to network rollouts, but has so far not pledged any financial support. At a recent event on the future of the UK mobile industry, speakers argued that it was unfair for telcos to bear the full cost of implementing the TSA.
Germany weighs stricter measures for Chinese firms: Elsewhere in Europe, the situation is more nuanced, with the German Government deciding in 2020 not to expressly prohibit certain vendors. Instead, BNetzA – with other federal agencies – mandated a ‘catalogue’ of security obligations that require operators to ensure diversity in their equipment and to source critical core components from certified suppliers. According to the Chinese embassy in Germany, Huawei now accounts for 60% of the country’s 5G network infrastructure. Despite the considerable potential cost of an uncompensated rip and replace programme like those ongoing in France and the UK, the German Government is reported to be considering tighter restrictions on Huawei and ZTE. Such a move would mark a shift in its political position and prove particularly painful for Deutsche Telekom, which had reached 94% 5G coverage by the end of 2022.
