New 5G headache in UK tarnishes Huawei’s strong results

Read time 4min 40sec
UK prime minister Boris Johnson.
UK prime minister Boris Johnson.

The UK government is set to make a dramatic U-turn on the role Chinese telecommunications giant Huawei will play in rolling out 5G networks in the country.

The news comes after the Chinese company yesterday announced financial results for the first half of 2020.

Besides the company facing pressure from the US export ban, as well as the COVID-19 pandemic, Huawei reported revenue of 454 billion Chinese yuan (about $64.9 billion) for the first half of 2020; 13.1% more than it made in 2019.

It also increased its net profit margin from 8% to 9.2% over that period.

However, as the company enjoys its strong financial results, it is facing a new headache in the UK.

According to Reuters, prime minister Boris Johnson is set to ban Huawei from Britain’s 5G network on Tuesday, in a momentous decision that will delight Washington, dismay Beijing and signal the end of a two-decade-long partnership with the country’s biggest mobile operator.

The latest move comes after a January announcement by the UK government that Huawei will be allowed to play a limited role in the UK's 5G network.

About six months ago, the UK said Huawei will be excluded from all safety-related and safety-critical networks, will be excluded from sensitive geographic locations such as nuclear sites as well as military bases, and will have a 35% cap in periphery (non-sensitive parts) of the 5G network.

However, BBC notes that UK ministers look set to exclude the Chinese company, with no new equipment installed from next year.

The move is in part a result of pressure from Washington. However, the precise time frame and details of the phase-out will be crucial in determining how the decision is received, BBC notes.

Trade war casualty

The Trump administration in the US placed Huawei on a blacklist in May last year, restricting sales to the company of US-made goods such as semiconductors.

Since then, the US government has been putting pressure on its allies to shut the door on Huawei.

In 2019, Huawei found itself in the middle of a trade war between the world’s two biggest economic powers, the US and China.

As the trade war intensified, the US Department of Commerce put Huawei on an export blacklist known as the entity list, citing “national security threats” due to the company’s close ties to the Chinese government.

Huawei has denied installing any backdoors in its networking equipment for alleged government spying.

According to Reuters, Britain’s National Security Council, chaired by Johnson, will meet on Tuesday morning to discuss Huawei. Media secretary Oliver Dowden will then announce a decision to the House of Commons later in the day.

It says the immediate excuse for the about-turn in policy is the impact of new US sanctions on chip technology, which London says affects Huawei’s ability to remain a reliable supplier.

Huawei and its customers, which include BT, Vodafone and Three, are waiting to see how extensive the new ban will be and how quickly it will be implemented, with hundreds of millions of pounds riding on the outcome, says the report.

Huawei’s equipment in Britain’s mobile carriers at present is mainly found in the radio access network.

Hope in African ops

The US ban on Huawei has had “no substantial effect on local operations”, according to Kian Chen, deputy CEO for Huawei SA.

“We will continue to serve all our customers and partners with focus and dedication, to meet their needs and contribute to the growth of the ICT sector,” ITWeb recently quoted Chen as saying.

In SA, president Cyril Ramaphosa has thrown his weight behind Huawei, accusing the US government of being jealous of the Chinese telecommunications company in the 5G race.

Local mobile operator MTN recently switched on its 5G network using Huawei technology.

MTN’s 5G deployment in Johannesburg uses Huawei Massive MIMO technology. “This technology guarantees the user experience for services that require high bandwidths such as 4K video, multi-angle video, and AR/VR services, and provide broadband services for families and SMEs,” Huawei said at the launch.

Meanwhile, in its results, Huawei's carrier, enterprise and consumer businesses achieved CNY159.6 billion ($22.7 billion), CNY36.3 billion ($5 billion), and CNY255.8 billion ($32 billion) in revenue, respectively.

The company says as countries around the globe are grappling with the COVID-19 pandemic, information and communications technologies have become not only a crucial tool for combatting the virus, but also an engine for economic recovery.

Huawei reiterated its commitment to working with carriers and industry partners to maintain stable network operations, accelerate digital transformation, and support efforts to contain local outbreaks and reopen local economies.

“The complex external environment makes open collaboration and trust in global value chains more important than ever,” says the company.

“Huawei has promised to continue fulfilling its obligations to customers and suppliers, and to survive, forge ahead, and contribute to the global digital economy and technological development, no matter what future challenges the company faces,” it concludes.

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