BT Adds U.S. Fiber Supplier to Limit Its Reliance on Huawei Gear

Thomas Seal

14 May 2020, 08:10 PM IST

(Bloomberg) -- Britain’s biggest landline network has brought on a new supplier to help cut its reliance on China’s Huawei Technologies Co. and ramp up construction of a nationwide fiber-optic system.

BT Group Plc’s infrastructure unit Openreach signed a long-term contract to bring in U.S. firm Adtran Inc. alongside Huawei and Finland’s Nokia Oyj as a strategic partner. Adding an American component maker will help London-based BT limit the use of China’s Huawei technology in its fiber-optic network and meet national security rules. The parties didn’t disclose financial terms.

In January, Britain capped the amount of data that can be carried over Huawei’s full-fiber and 5G equipment at 35%, and gave networks three years to comply. The move dealt to a blow to the Shenzhen-based vendor, but stopped short of U.S. demands for an outright ban.

Huawei makes up 44% of the U.K.’s full-fiber market, according to the government. BT said overhauling systems to obey the rules may cost it 500 million pounds ($611 million), though mainly it pointed to the changes it needs to make to wireless towers.

“It helps Openreach to be able to execute on their plan and still abide by those requirements,” Jay Wilson, Adtran’s chief revenue officer, said in an interview. The contract could make up a 10th of Adtran sales during the peak of its build, he added. The Huntsville, Alabama-based company also supplies some of BT’s small startup rivals, as well as big U.S. carriers like AT&T Inc. and European peers like Deutsche Telekom AG.

The contract comes a week after BT accelerated its planned fiber rollout, pledging to connect 20 million premises by the mid- to late-2020s if conditions allow. It also scrapped dividend payments to help pay for the pledge, and rivals Telefonica SA and Liberty Global Plc announced the same morning that they were merging their U.K. units to create a stronger rival to the former state monopoly.

Bloomberg first reported Openreach’s search for a new supplier in November. Peter Bell, the company’s network technologies director, said in a statement that the Adtran deal would help the U.K. “bounce back from the Covid-19 pandemic” with a better broadband network. The U.K. has lagged behind European neighbors in building out glass-based fiber connections, relying instead on lower-bandwidth, copper-transmitted wires.