The looming financial impact of the UK government’s ban on the use of Huawei equipment in 5G networks has been revealed after the Chinese company revealed shrinking revenue and profits at its British unit.
British telecoms companies were told last summer that it would be forbidden to buy The Chinese company’s 5G equipment is effective from January 2021 and will have to remove any equipment already installed by 2027.
This gave companies including Vodafone and BT the opportunity to stockpile alternative equipment last year as they prepare for the post-Huawei market from 2021 by signing supply contracts with Ericsson, Nokia or smaller players looking to Fill the void In the market left by the embargo on the world’s largest communications equipment company.
Huawei Technologies, the UK operating unit, said revenue in 2020 fell 27 per cent to £913m while operating profit, before interest and tax, fell by a quarter to £36.4m. The profit number benefited from a £26 million decrease in expenses during the period due to lower staff and travel costs.
It paid a dividend of £90m to its parent company, up from £55m in 2019.
The UK business is a relatively small section of Huawei’s broader business, which reported revenue rising to $137bn (£97bn) for 2020 with operating profit falling to $11bn (£7.8bn) for the year.
However, UK businesses became emblematic of Huawei’s woes last year after the UK government made an amazing turnaround after initially deciding to allow limited use of Huawei 5G equipment.
Britain has long been the Chinese company’s gateway to the world, and Huawei has gone so far as to fund a test centre, run by Britain’s Security Services, to reassure the government and industry that its equipment is safe.
Lord John Brown, the former chief executive of BP, resigned as president of Huawei Technologies last year. Sir Mike Ryke, the former CEO of BT, followed suit in March of this year.
“Not only will the political decisions have a real impact on our UK business, the people we employ and our customers, but they will delay the rollout of 5G networks and put Britain on the slow digital path,” Huawei said.
US authorities have led the charge against Huawei, putting pressure on countries around the world to stop using the company to supply equipment for critical networks. The move to prevent US companies from supplying Huawei means it has been unable to use software for its consumer products, such as Android smartphones, and is struggling to acquire chips.
The full impact of the British government’s ban will likely be evident in the 2021 accounts as the ban on 5G equipment begins. The Chinese company still has operations in the country to supply broadband equipment and has significant research resources in the country. It is continuing with a plan to build a new photovoltaic facility outside Cambridge despite the government ban.