Ericsson Warns of No-Deal Brexit Threat to UK and European Telecom
The "worst-case scenario" of a no-deal Brexit would be a major blow to the telecom industry in both the UK and the rest of Europe as countries embark on the critical rollout of next-generation 5G and all-fiber networks, according to a senior executive at Ericsson.
Gabriel Solomon, who heads up European government affairs for the Swedish equipment maker, said an exit minus any agreement would throw up supply-chain complications in the UK and be an "extreme bad case."
Such an outcome has become a distinct possibility since Theresa May, the UK's soon-to-quit prime minister, failed to secure parliamentary support for the deal she negotiated with European authorities after UK citizens narrowly voted to leave the European Union (EU) during a referendum held in 2016.
May tendered her resignation several weeks ago, and the two remaining candidates to replace her -- Boris Johnson and Jeremy Hunt -- have both indicated a willingness to quit the EU with no deal in October if further negotiations stall.
That would leave UK service providers facing difficult questions, according to Solomon. "Where is your supply chain sitting? Where do the components come from?" he told Light Reading during an interview this week. "It becomes complicated to map out where everything comes from and what authorizations you need to import, and if there are any tax issues. That is an extreme bad case."
The remarks come shortly after Clive Selley, the CEO of BT's Openreach networks business, said the prospect of a "hard" Brexit had forced Openreach to change its hiring policy.
"I'm worried about access to the wider labor pool and that is why we are hiring into Openreach rather than relying on third parties who use European labor," he told attendees at the Connected Britain conference last month. "Large-scale FTTP [fiber-to-the-premises] is a labor-intensive business."
With plans to extend all-fiber networks to about 4 million properties by March 2021, Openreach hired 3,500 trainees in its last fiscal year and aims to recruit another 2,700 in the current one. The increase meant BT's overall headcount rose by around 1,000 employees last year, to 106,742 employees, despite ongoing efforts to improve efficiency by slashing 13,000 back-office and mid-level management jobs.
Ericsson has similar concerns to Selley, according to Solomon. "I think the Openreach issue is a very real one and if we had an accelerated deployment program from mobile operators that we were needing to supply then clearly we rely on third parties and a lot of the talent is international," he says.
Despite assurances from politicians, companies are clearly worried -- if there is a no-deal Brexit -- about the future rights of EU citizens living or seeking work in the UK.
That move could also be a complication for UK government agencies that regulate the telecom sector, including Ofcom and the Competition and Markets Authority (CMA). "At a macro level, the government intends to transpose the European telecommunications code fairly quickly and that is fine, but if we are not part of the EU then Ofcom and the CMA have a lot more freedom in how they approach their governance of the sector," he says. "They want to be bound by certain things."
The CMA makes decisions about UK mergers and acquisitions but has also referred prospective deals to EU authorities, which blocked a planned merger between mobile operators O2 and Three in 2016. The UK government agency is understood to be recruiting staff to cope with the additional workload it could face after Brexit.
Withdrawing Ofcom from EU activities would be a setback for Europe, according to Solomon, because of the positive influence the national regulator has had at a regional level. "There will be a big gap because Ofcom has been a well-resourced regulator that has brought a lot of influence into the way EU debates are shaped," he says. "The UK actually led liberalization as one of the first countries to move away from a monopoly and ever since then we have had a leading role in expertise transfer."
Ericsson is currently pushing for a more coordinated and "investor-friendly" approach to European telecom regulation. Executives say the region could fall behind the US and China in the race to build 5G networks unless conditions improve.
The Swedish vendor has repeatedly complained that European regulators are too slow to release spectrum to operators and charge too much for licenses. The difficulty of obtaining permits to build networks, and regulatory opposition to merger activity, are further constraints for the European industry, says Solomon.
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— Iain Morris, International Editor, Light Reading