Vodafone to spend €200m to remove Huawei from EU core networks

5 Feb 2020

Vodafone CEO Nick Read. Image: PA Media

Vodafone estimates that it will take five years and cost €200m to remove equipment made by Huawei from its core network across Europe.

Vodafone has said it will remove Huawei systems from its sensitive ‘core’ networks in Europe at a cost of around €200m in the wake of decisions to restrict the Chinese firm’s 5G role in the UK and elsewhere.

The mobile phone giant confirmed it would take five years to strip out equipment made by Huawei from its so-called core – the centre of the telecoms network that processes customer data.

Vodafone has a small amount of Huawei equipment in its core network across Europe, but is already largely compliant with the UK rules.

The announcement comes after decisions by the UK government and the EU on the future of Huawei in the 5G network, which will see it barred from having a role in safety-related and critical networks.

Five years to implement

Vodafone chief executive Nick Read said: “We have now decided, as a result of the EU toolbox and the UK government’s decision, to take out Huawei from the core. This will take around five years to implement at a cost of approximately €200m.”

In the past, Read has said that Europe is the “only region that’s severely held back” by attempts to exclude Huawei from the global roll-out of 5G networks. At the time, the Vodafone CEO said: “If we want to compete against China and the US, we need a range of diverse technology.”

While Vodafone UK does not currently use Huawei in its core network, the group uses a mix of Huawei, Ericsson and Nokia equipment for its 4G and 5G masts in Britain.

Rival BT recently said the UK decision on Huawei will cost it around £500m over the next five years. The group, which also owns and runs the EE mobile network, had previously warned that it could take seven years to completely remove Huawei from UK networks.

Vodafone’s recent performance

The comments came as Vodafone reported a 0.8pc rise in organic revenues over its third quarter to the end of December. A weaker performance in Europe – where revenues fell 1.4pc – was once again offset by a solid result worldwide, where revenues jumped 9.1pc.

In the UK, it saw a pick-up, with revenues rising 0.6pc against a flat performance in the previous three months. The company added 134,000 mobile contract customers across the UK in the quarter, but saw new broadband customer additions fall to 20,000 as competition took its toll.

Shares lifted as much as 3pc this morning (5 February) after the update, before settling around 1pc higher.

Dent in business targets

Joe Healey, investment research analyst at The Share Centre, said it was reassuring that Vodafone remains on track with business targets.

He added: “The business remains exposed to the key global drivers of growth including the demand for data and increased smartphone penetration worldwide.

“Cost-cutting measures also seem to be making good progress, with the group utilising AI to help improve efficiencies and customer experience, although the stripping of Huawei systems out of its core network will, over the coming years, dent this.”

Meanwhile, Vodafone is still considering pulling out of India after losing a decade-long legal dispute over how telecoms businesses in India should calculate certain revenues, which left the company on the hook for as much as €3.7bn in retrospective fees, interest and fines.

The company said today that the outlook for its Indian business, Vodafone Idea, ‘remains critical’.

– PA Media, with additional reporting by Kelly Earley