Huawei swap-out in UK has become a costly and tortuous slogHuawei swap-out in UK has become a costly and tortuous slog

Huawei's 5G equipment dots the land four years after the UK government decided on a ban, and the country's networks are among the worst in Europe.

Iain Morris, International Editor

July 17, 2024

7 Min Read
Huawei baseband equipment in London
Huawei is still present at numerous UK mobile sites, such as this one in southwest London.(Source: Iain Morris/Light Reading)

Customers of Big Yellow, a suitably colored storage depot in southwest London, cannot avoid walking past a metal column that towers above it like a rocket on a launchpad just meters from the entrance. At the top, the flat white fingers of mobile antenna and radio equipment are bunched around a cylindrical frame, while a vertigo-inducing ladder runs thinly down one side. A steel cage keeps any curious passersby away from the bottom. Inside is a jungle of cables connecting various grey boxes. "Triple band combiner," read the words on three of them, above the logo and name of Huawei.

The Chinese vendor's continued presence in the UK's mobile market, four years after the government decided to ban it, is a sore point for opponents who see it as a threat to national security. A stooge of the Chinese state, Huawei could use software "backdoors" at its government's behest to spy on UK officials or even cripple networks, they argue. Scaremongering nonsense, responds Huawei, insisting it is employee owned and has nothing to do with the Chinese government. No one has produced incontrovertible evidence of its alleged wrongdoing, Huawei adds. Sabotaging customer equipment would hardly be in its own commercial interests.

None of this stayed the hand of the former Conservative government. But after hearing telcos complain that an immediate ban would be costly and disruptive, it gave them until the end of 2027 to remove all Huawei equipment and software from their 5G radio access network (RAN) infrastructure. As an interim step, the government ordered them to ensure Huawei was used at no more than 35% of 5G sites by July 2023. The volume of mobile data traffic passing through Huawei products between August 2023 and July 2024 must also be capped at 35%.

Huawei-free is not to be

The RAN rules have had serious consequences for all the UK's mobile network operators except Virgin Media O2 (VMO2), which had only dabbled in Huawei at a few sites. In the pre-5G era, BT, the incumbent, was using Huawei across about two thirds of its roughly 19,000 sites, according to reliable data from Strand Consult, a Danish research firm. Vodafone, with 18,000 sites, relied on Huawei at a third of them. Three, the smallest operator, had appointed Huawei its sole 5G vendor, after building 3G with Nokia and 4G with Samsung.

All three companies met last year's interim target. In two weeks, they are expected to show that Huawei-delivered traffic for the previous year was below the 35% threshold. Yet all claim the government restrictions have driven up costs and hindered 5G rollout in the UK. Replacing Huawei with more politically acceptable vendors has consumed cash and personnel. Unlike in the US, where taxpayer money has supported a swap-out in rural communities, UK operators have had to fund all of it themselves. 

No telco, moreover, has been able to play classroom swot and complete work years ahead of the deadline, meaning none is Huawei-free. The entire effort, including a switch from Huawei to Ericsson in the network core, will cost BT about £500 million (US$648 million), it has long maintained. Vodafone initially reckoned costs would be in the low single digit billions. Three says nearly all the £450 million ($583 million) it invested in capital expenditure last year, a 39% drop on the 2022 figure, went toward either replacing Huawei or the Shared Rural Network, an initiative with other telcos to improve coverage in sparsely populated areas.

Meanwhile, UK 5G services are lousy, according to numerous sources. In January, UK regulator Ofcom published figures for outdoor population coverage of 74% for BT, 67% for Three, 57% for Vodafone and 51% for VMO2. Three's coverage had fallen 11 percentage points since September 2023 after it aborted experimentation with dynamic spectrum sharing, a technology that divides frequencies between 4G and 5G. These metrics compare with coverage levels of 90% in North America and India, and 95% in China, according to recent data from Ericsson, Huawei's biggest 5G rival.

In February, market research firm Opensignal ranked 34 European countries based on 5G connection speeds and put the UK sixth from bottom, above Poland, Italy, Moldova, Bosnia and Herzegovina, and Kosovo, with average download speeds of 33 Mbit/s. Norway, the market leader, enjoyed a zippy 102.3 Mbit/s. For dedicated 5G observers, the indoor experience is especially bad in the UK compared with other European countries.

Merger mayhem

Yet this cannot all be blamed on the Huawei swap-out. While other European countries seem to match up well against the UK, Europe overall is now far behind China, India and North America, according to Ericsson, with 5G population coverage of 70%. In the midband, considered the 5G spectrum sweet spot, availability drops to just 30%, against 95% in China, 90% in India and 85% in North America.

"It is a very fragmented market where some of our customers have difficulty generating the return on invested capital, and that means, of course, that it is difficult to find the investment levels that are required to build those critical programmable networks," said Fredrik Jejdling, the head of Ericsson's mobile networks business unit. Long-running regulatory opposition to in-country mergers is largely the culprit, he thinks.

That could change in the UK if authorities approve a proposed merger between Vodafone and Three. It would produce a giant telco with around 26,000 sites, after the divestment of about 10,000, a lower ratio of costs to sales and much healthier returns, insist the telcos. If the deal goes through, they have promised to invest £11 billion ($14.3 billion) over a ten-year period in nationwide 5G rollout and sell frequencies to VMO2 in the hope this will address any regulatory concern about a spectrum imbalance.

But it would still leave BT and the new Vodafone-Three with a lot of Huawei equipment to replace. For commercial and technical reasons, operators have tended to buy 4G and 5G from the same vendor, which means government restrictions are forcing them to rip out 4G kit as well. If 5G were available at every 4G site, BT would today, under the existing rules, be limited to about 6,650 Huawei-served sites, with Vodafone and Three each capped at around 6,300. If they merge to operate 26,000 sites, however, the figure would plummet from 12,600 across the two companies to just 9,100.

At a press conference earlier this year, Iain Milligan, Three's chief network officer, revealed his employer had 5,500 5G sites in operation and was aiming to reach 6,000 by year end. Ericsson is replacing Huawei across this footprint. Vodafone is still in the early stages of changing from Huawei to Samsung (plus some NEC) at 2,500 sites, but the operator appears to have made good progress on its own switch to Ericsson at another 3,500.

BT had previously relied on Huawei for about two thirds of its 4G network, or some 12,500 sites, according to Strand Consult's data, with Nokia serving the rest. Since new government rules came into force, it has been shifting to a 5G mixture of Ericsson and Nokia. No telco is still buying from Huawei. As 5G coverage goes up, Huawei's share of it naturally goes down.

No sympathy for the wicked

Critics are unsympathetic to the telco arguments. Much of the 4G equipment was due for an upgrade and would have needed replacing anyway. Other (albeit smaller) countries have been able to complete swap-outs in a fraction of the time given to UK operators. The £500 million in costs cited by BT, which takes depreciation into account, does not seem much in the context of the nearly £5 billion ($6.5 billion) BT pumped into capital expenditure last year.

Even so, the sector is undeniably in a terrible state. Operators everywhere are reluctant to invest in a network technology that has brought no improvement in sales. Capital expenditure is being cut. Last week, Ericsson said it was not prepared to be as "aggressive" as Chinese vendors in Europe to seal deals, implying its products are pricier than Huawei's. And in the UK, its only big 5G competitor is Nokia.

By ensuring products from different vendors are interoperable, the concept of open RAN was supposed to buoy specialists and boost competition. But it has largely been a failure so far. Recent data from Omdia, a Light Reading sister company, shows the dominant trio of Ericsson, Huawei and Nokia gained RAN market share last year.

Countries under European Union pressure to evict Huawei are unlikely to take encouragement from the UK experience. In Germany, where Huawei caters to between 50% and 60% of widely deployed 5G networks, authorities have now said it can stay if someone else provides the management software for its RAN products. Technically, that looks difficult, say operators. But if it's a choice between that and the UK's nightmarish removal job, they will give it their best shot.

Update: This story has been changed since it was first published to include additional details of the vendor mix in each operator's network.

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About the Author

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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