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* Company welcomes UK decision to allow Huawei into networks
* Says high-risk vendor rules will cost it extra 500 mln stg
* Third-quarter results miss forecasts
* Says remains on track for the year
* Shares fall 7%
(Adds further CEO comments, updates shares, changes headline)
By Paul Sandle
LONDON, Jan 30 (Reuters) - Britain's decision to cap
Huawei's role in 5G will cost BT 500 million
pounds ($657 million), the telecoms company said, as it will
need to remove some of the Chinese group's gear from its network
and tap pricier rivals.
The bill adds to the pressure on Chief Executive Philip
Jansen, who wants to build nationwide gigabit fixed and mobile
networks for the future while trying to shore up revenue and
earnings in the short term.
Britain's biggest telecoms group has already spent billions
of pounds on sports rights and network upgrades to revive its
fortunes and the financial impact of the Huawei ruling added to
investor concerns about its financial performance.
BT's shares, down 25% in the last 12 months, were 7.5% lower
in early afternoon trade after the company's assessment of the
Huawei impact and a weaker-than-expected 3% drop in
third-quarter revenue which it blamed on regulation, tough
competition and declines in legacy products.
Core earnings fell 4% to 1.98 billion pounds, also slightly
below expectations, although BT stuck to its full-year guidance.
The cost for BT to comply with the Huawei cap lays bare the
financial stakes for other European countries and operators
deciding whether to restrict the Chinese company.
Britain on Tuesday said it would allow high risk vendors -
in practice Huawei - into the non-sensitive parts of
next-generation networks, defying U.S. appeals to block the
company on security grounds.
But London limited Huawei's market share of the 5G network
at 35%, excluded it from the sensitive core, where data is
processed, and banned it from critical networks and locations
like nuclear sites.
Jansen welcomed the decision on Huawei, a long-standing BT
partner, and said the security of the UK's communications
infrastructure should be the priority.
But he said BT would have to switch out equipment and spend
more on alternatives from Huawei's rivals Ericsson
and Nokia over five years to comply.
"Inevitably, because of the way that the network works on 4G
and 5G, there will be some 4G boxes that are Huawei that will
have to be eradicated," he told reporters. "And then there's
also an assumption around what the pricing scenarios might be
with alternative providers."
He said 5G roll-out targets would stay the same but there
would be a lot of operational upheaval.
BT is rolling out 5G using the Chinese company's radio
equipment, although it is not using it in the core and is
removing its gear from the core of its 4G network.
Jansen said Huawei's presence in its 4G network, which is
the foundation for 5G, was already slightly above 35%.
Huawei's role in its fibre-to-the-premise (FTTP) broadband
network was also currently just over 35%, he said, but the speed
of expansion meant it would quickly fall under the limit.
HERCULEAN EFFORT
Jansen said BT was ready to play its role in upgrading
Britain's communications infrastructure to gigabit speeds with
nationwide full-fibre broadband and 5G mobile.
It is rolling out FTTP to 4 million properties by March 2021
and plans 15 million connections by the mid-2020s if the
conditions are right.
Prime Minister Boris Johnson wants to go further, with all
of the country fibre connected by 2025. BT will have to play the
biggest part in realising his ambition.
"To make this happen is going to take a Herculean
collaborative effort," Jansen said.
BT needed clarity on the rate of return it could make on its
multi-billion pound investment, he said, along with an exemption
on business rates for new fibre networks and the ability to sign
long-term deals with other providers.
"Fibring up the UK will require us all to move fast and we
are running out of time if the industry is going to meet the
government's ambition," he said.
($1 = 0.7608 pounds)
(Editing by James Davey and Carmel Crimmins)
