Huawei’s U.K. Prospects Dented as BT Seeks Third Fiber Supplier
v’s U.K. Prospects Dented as BT Seeks Third Fiber Supplier
(Bloomberg) -- Britain’s dominant phone company is looking for a new broadband equipment supplier to reduce its reliance on China’s Huawei Technologies Co. as it prepares to connect millions of homes to optic fiber.
BT Group Plc’s infrastructure division Openreach has started an evaluation process to seek a third strategic vendor alongside Huawei and Finland’s Nokia Oyj for the full-fiber roll-out, a spokesman said in response to questions from Bloomberg News.
U.S.-based vendors are likely to be among the bidders, said people familiar with the matter, who asked not to be identified because the discussions are private.
“We already manage a large and diverse supply chain across our full-fiber build, and we’re constantly reviewing our options to make sure we can carry on building a high-quality network that offers great value for money,” the spokesman for BT’s Openreach said by email.
He declined to say which companies may be considered. Cisco Systems Inc., based in San Jose, and Adtran Inc., based in Huntsville, Alabama, are among the companies interested in the work, according to people familiar with the matter who asked not to be named.
Britain’s National Infrastructure Commission said last year it would cost 33.4 billion pounds ($43 billion) to build and maintain a national full fiber network over 30 years.
BT shares fell 0.8% to trade at 190 pence at 8:09 a.m. in London.
Adding a third vendor would bring bigger supply capacity and more competition that could push down costs for BT, which is struggling to accelerate network upgrades without cutting dividends to shareholders.
BT Mulls Dividend Cut as Last Resort to Accelerate Fiber Rollout
The move also underscores the pressure to curtail Huawei’s dominant position in communication networks following warnings that the company may be a security risk. U.S. officials have said Huawei would not be able to stop the Chinese government accessing its systems to spy on other countries or disrupt communications, something the company denies.
Those security concerns around Huawei have tended to focus on its role in next-generation 5G wireless networks.
The fiber contract could be a potential game-changer for the winning bidder’s U.K. operations. Openreach’s full-fiber network now reaches about 1.9 million homes and the company is ramping up spending with the aim of connecting 15 million or more by the mid-2020s -- about half of the country.
BT will be seeking proposals from potential suppliers by early January and aims to make a decision some time in the second quarter of next year, said one of the people familiar with the matter.
Trump’s Campaign
Whoever gets the deal, it’s likely to be welcomed in Washington. President Donald Trump is trying to persuade allies to ban Huawei from their networks but the campaign has failed to threaten the Shenzhen-based vendor’s dominance in network equipment.
Britain and other European nations have been wary of singling out Huawei for punishment and have leaned toward allowing it continued access to less sensitive parts of their networks on condition that its activities are monitored more closely.
While the political turmoil caused by Brexit has delayed any definitive decision, British government officials have made it clear that network operators should not depend too heavily on Huawei.
Relying on a single supplier is a risk to the “security and resilience” of the U.K.’s telecom networks, the government said in a supply chain review document published in July. “The dependency risk is most pronounced in the mobile and fixed access networks where supply is dominated by three global players” including Huawei, the U.K. market leader, it said.
Prime Minister Boris Johnson has set a goal to install gigabit-speed connections nationwide by 2025 and committed 5 billion pounds for a rural build-out. The opposition Labour Party has said it would spend 20 billion pounds nationalizing the network and making broadband free for all if it wins a Dec. 12 election.
BT connections are still based mainly on slower, less-reliable copper but it’s pivoting to fiber in the face of government pressure and rival investments backed by finance industry players such as KKR & Co Inc. and Goldman Sachs Group Inc.
--With assistance from Ian King.
To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net
To contact the editors responsible for this story: Thomas Pfeiffer at tpfeiffer3@bloomberg.net, ;Rebecca Penty at rpenty@bloomberg.net, Jennifer Ryan
©2019 Bloomberg L.P.