Vodafone to remove Huawei from core of European network

LONDON (Reuters) – Vodafone (VOD.L) will remove Huawei technology from the core of its European networks following Britain’s decision to restrict the Chinese company’s role in 5G and new EU guidelines on the firm’s equipment, 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,” he told reporters on Wednesday.

“This will take around five years to implement at a cost of approximately 200 million euros.”

Britain last month allowed Huawei a limited role in new mobile networks – defying U.S. pressure for an outright ban on security grounds – but excluded it from the core and imposed a 35% cap in the less-sensitive radio network.

Huawei has repeatedly denied U.S. allegations that its equipment could potentially be used by Beijing for spying.

Read said Vodafone would only have to make minor adjustments to comply with the rules in Britain, where it has not deployed Huawei equipment in its core network.

He broadly welcomed the British approach, which he said was evidence based and differentiated between the core and non-core, but opposed caps on the use of particular vendors by operators.

“It hugely impacts customers and the quality of networks if we are forced to do an accelerated swap,” he said. “Although this isn’t an issue in the UK I wouldn’t want this for Europe.”

He said it could lead to delays of anything between two and five years depending on which countries decided to impose a cap.

“The U.S. is racing ahead, China is racing ahead,” he said. “We can’t hold back our 5G deployment and therefore I think caps would be restrictive on that basis.”

In Germany, Vodafone’s largest European market, lawmakers have been arguing over Huawei for weeks.

EUROPE A SLOG

Earlier on Wednesday Vodafone reported organic service revenue growth of 0.8% in the third quarter, an uptick from the second, helped by continued recovery in South Africa.

Europe, however, remained a slog for the world’s second biggest mobile operator, with organic service revenue down 1.4% year-on-year, the same rate seen in the previous quarter.

“We expect a further gradual improvement in service revenue growth in Q4, led by Europe,” Read said.

Shares in Vodafone were trading 1.4% higher at 0930 GMT.

Read is focusing Vodafone’s operations on two regions – Europe and sub-Sahara Africa – and last month the company agreed to sell its 55% stake in Vodafone Egypt for $2.4 billion to Saudi Telecom Company.

The group also wants to generate more value from its network infrastructure. It has appointed the senior management team for its European tower company, Read said, and is preparing for a potential public listing in early 2021.

Vodafone reiterated its full-year guidance of adjusted core earnings of 14.8-15.0 billion euros, and free cash flow before spectrum costs of about 5.4 billion euros.