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Europe's 5G delayed by trade war and security reviews, says Tele2 CEO

By Esha Vaish

By Esha Vaish

STOCKHOLM (Reuters) - The rollout of 5G services across Europe has being slowed by U.S. sanctions against Huawei and as European governments review the impact of using Chinese equipment, the head of Swedish telecoms group Tele2 said.

U.S. President Donald Trump's administration had targeted Huawei on security grounds but a partial lifting of restrictions was a key element of a weekend agreement to reopen stalled trade negotiations with China.

Tele2 CEO Anders Nilsson said the biggest impact of the restrictions and security concerns was being felt through a delay in 5G investment across Europe.

Tele2, Sweden's second largest telecoms company which also operates in the Baltic countries, has been holding off on striking deals with equipment suppliers.

"We have a global supply chain, so whoever you buy equipment from you will find components from China. Even if we buy equipment from Ericsson, which is our neighbor here, you will find Chinese hardware and parts in that equipment," he told Reuters at Tele2's Stockholm headquarters.

"We're right now talking to all the vendors, but decisions are postponed. This is not only Huawei, this is all vendors."

He also said he had no plans to stop selling Huawei handsets as U.S. sanctions had not led to any significant drop in sales or impact in demand.


4G OR 5G?

5G rollout has been billed as transformative for the telecommunications industry, resulting in a 10-fold increase in data transfer capacity that would help enable self-driving car fleets and smart factories.

Nilsson said that consumers were likely to face higher prices if governments banned Huawei, limiting competition to Nordic suppliers Ericsson and Nokia.

"From our perspective, the main reason to do 5G right now is because it is a good way to build capacity, but we can continue building capacity in 4G. So 5G is not something we need to do right now," he said in an interview before Sino-U.S. tensions eased over the weekend.

"But... ultimately if we go down the more protectionist route here, consumers will have to pay price."

In follow-up comments on Monday, Nilsson said his view was unaltered.

"We follow the events with great interest, but it's too early to take any firm decisions based on it," he said.


CASH IS KING

He expects a drawn-out 5G rollout, with peak capital spending for his company of only about 3-3.5 billion Swedish crowns, largely in line with Tele2's capex of 3 billion crown ($323 million) last year which included no 5G investment.

Tele2 is focused on turning itself into a cash generative company, growing revenues by improving consumer retention and bundling services together, and then keeping spending flat to allow it to make hefty payouts to shareholders.

Nilsson said possible options for future payouts were special dividends, increasing the regular dividend or share buybacks.

He also reiterated Tele2's medium-term outlook for low-single digit growth in end-user service revenue and mid-single digit growth of adjusted EBITDA.

The company has transformed its business to achieve its goals, in recent years exiting several regions and buying cable TV firm Com Hem last year.

In February, it doubled its cost savings target from the ComHem deal to 900 million Swedish crowns.

Nilsson said he expected Tele2 to be able to deliver cost savings of "billions of Swedish crowns" on top of that target, by integrating Swedish operations under a common IT infrastructure and integrating the tech service teams.

"We're still planning right now, but this could add billions of more kronas in savings long term," he said.


(Additional reporting Helena Soderpalm in Stockholm; editing by Niklas Pollard/Keith Weir)