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Huawei Gets Kicked in the Teeth by the British

Alex Webb
Huawei Gets Kicked in the Teeth by the British

(Bloomberg Opinion) -- When it comes to 5G-enabled smartphones, Britain is a pretty decent bellwether: It’s one of just five countries currently rolling out the new mobile standard. So the decision by BT Group Plc, the U.K.’s former national carrier, not to offer 5G handsets made by Huawei Technologies Co. augurs badly for the beleaguered Chinese telecoms firm’s consumer aspirations. The mobile operator Vodafone Group Plc followed suit.

It’s telling too that of those five pioneering 5G countries – which include the U.S., China, Switzerland and South Korea – Britain is the one you’d expect to be most neutral about whether or not to sell Huawei handsets.

In the U.S., Huawei is already prevented from selling its phones, while China is Huawei’s home territory. Switzerland’s Swisscom AG has already started offering 5G phones from another Chinese company, Oppo. And South Korea is dominated by Huawei’s rival Samsung Electronics Co. Ltd., so isn’t much of a potential market for the Chinese company.

That’s why Britain is an important indicator of what the next wave of 5G-implementing countries might choose to do with the Chinese company’s handsets.

The U.K. still hasn’t gone as far as to ban Huawei outright from its 5G networks, despite the best efforts of the Americans to persuade it to do so. Nevertheless, BT’s move is a direct consequence of the U.S. blacklisting of Huawei last week, which prohibits American companies from supplying the Chinese telecoms equipment group. Crucially, that ban extends to Alphabet Inc.’s Google, whose Android operating system runs Huawei’s phones. That’s why BT doesn’t want to take the risk of offering handsets to its customers that might end up not carrying fully functional software.

Last week’s U.S. Android ban doesn’t seem to extend to Huawei’s already available handsets, or those that have been announced. But it has left mobile phone operators like BT and Vodafone struggling to work out whether the software on those phones can be updated, and whether other Alphabet services such as Google Maps and the Google Play Store will continue to be supported on the handsets.

The last thing a carrier wants is a disgruntled consumer who returns in several months’ time and demands a refund because their smartphone doesn’t work as advertised.

Of course, the damage from the U.S. blacklisting is more immediately significant for Huawei’s lucrative plans to build 5G networks than it is for its smartphone ambitions – but the latter will become more important. Deloitte expects just 1 million 5G-ready handsets to be sold by all mobile phone makers in 2019, out of a projected 1.5 billion smartphone sales. That will rise to as much as 20 million units next year, though that’s still just 1 percent of the total.

Nevertheless, it’s another opportunity for rivals to steal market share from the Chinese company. That’s more likely to benefit second-tier handset rivals such as LG Electronics Co., where even small increases in sales make a difference.

Swisscom had planned to introduce Huawei’s 5G-enabled Mate X in the third quarter. One has to wonder whether it will push ahead with that plan. This is a real kick in the teeth for Huawei as it tries to become a consumer brand to rival Apple Inc. and Samsung.

To contact the author of this story: Alex Webb at awebb25@bloomberg.net

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

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