UK telecom giant BT is to strip all Huawei equipment from its core 4G network and prevent the Chinese equipment vendor from bidding for core 5G network contracts, reports the Financial Times newspaper (subscription required).
The move appears to reflect government concern about the close links between Huawei and the Chinese state, and the worry that Huawei's equipment could be used as a "backdoor" for Chinese spying. (See Europe's Telcos Fret as Walls Close In On Huawei and UK Govt Warns Telcos on Choice of 5G Vendors.)
The vulnerability of the core network may have been far more troubling for government security watchdogs because it is linked to important IT systems that contain information about customer accounts.
According to the Financial Times story, which cites a BT Group plc (NYSE: BT; London: BTA) spokesperson, BT is already extracting Huawei Technologies Co. Ltd. equipment from its 3G and 4G core networks. It has already replaced most of the 3G equipment and expects the 4G overhaul to take between 18 months and two years.
While BT has reportedly blocked Huawei from bidding for any 5G core network contract, it has not imposed the same kind of restrictions on the radio side, where it is already trialing Huawei's 5G basestations in preparation for its 5G service launch next year.
The rationale is that any use of Huawei in the radio access network would not come with the same kind of risk posed by the core network.
Through its EE mobile subsidiary, which it acquired in 2016, BT is understood to use radio equipment from Huawei and Finnish rival Nokia to support its 4G network.
The latest development would seem to be a major setback for Huawei, which is facing a backlash from government authorities in various Western countries. In the UK, it raises the prospect of a full-blown government ban on Chinese equipment suppliers.
Under apparent pressure from the US government, both Australia and New Zealand have recently taken steps to exclude Huawei and its smaller Chinese competitor ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) from their 5G markets. (See New Zealand blocks Huawei from 5G deal with Spark and Australia Excludes Huawei, ZTE From 5G Rollouts.)
The US is also said to be leaning on Canada to impose similar restrictions, while in Europe both the UK and Germany are reported to be considering their options.
Many operators have resisted the criticisms of Huawei, arguing that its equipment is rigorously tested in their networks. Service providers frequently cite the Chinese company's technological prowess when explaining their decision to use it. (See Banning Huawei From UK Could Drive Up Consumer Prices, Warns Three CEO.)
BT's decision to replace Huawei in the core network will focus attention on German incumbent Deutsche Telekom AG (NYSE: DT), which is similarly understood to rely on Huawei for some core network gear.
Asked if Deutsche Telekom had a contingency plan in the event of a government ban on Huawei, a spokesperson for the operator said in a written statement: "We are pursuing a multi-vendor strategy for the infrastructure elements used (manufacturers primarily include Ericsson, Nokia, Cisco and Huawei) and have a good mix of manufacturers in the live networks and for the planned expansion."
"With a view to timely expansion and investment requirements, however, it will be difficult to exclude high-performance suppliers in Germany," the spokesperson added, hinting that any formal ban could hold up the deployment of 5G networks in the country.
The Financial Times report about BT comes only a couple of days after Alex Younger, the head of UK intelligence agency MI6, had voiced concerns about Huawei during a rare public appearance at a UK event.
"We need to decide the extent to which we are going to be comfortable with Chinese ownership of these technologies and these platforms in an environment where some of our allies have taken quite a definite position," he is reported to have said by the Guardian newspaper. "It's not wholly straightforward."
— Iain Morris, International Editor, Light Reading