If Canada Bans Huawei, Wireless Companies May Seek $1 Billion in Compensation: Report

According to a new report from Reuters, Canada’s wireless companies affected by a potential ban on Huawei from 5G, would attempt to seek $1 billion in compensation for the government’s decision.

The story from Reuters cites an unnamed government source close to the situation and others as well.

If Ottawa were to announce a ban on Huawei 5G, “affected companies have made clear they want compensation for tearing out their existing Huawei gear,” say two unnamed sources close to the situation.

Bell Canada and Telus Corp currently use Huawei gear for 4G networks. A ban on Huawei would mean existing 4G gear would not be compatible with new 5G gear from Ericsson and Nokia, respectively. The end result would mean existing Huawei 4G gear would need to be removed.

An anonymous government source told Reuters, “I’m not sure there is a solid legal case that we would have to compensate for making a proper national security decision.”

Members of Parliament would also have to face “the public perception of handing over a billion dollars or more to very large companies,” added the unnamed government source.

“We obviously want to spend money on things we feel are going to grow the economy rather than on something like that (compensation),” said the government source.

According to Scotiabank analysts back in June, Bell would be exposed to a $300-350 million CAD hit over five years to remove Huawei 4G equipment. For Telus, BMO estimated their exposure to nearly double that of Bell, for a total cost of nearly $1 billion or so for both companies to remove Huawei gear.

Another unnamed source said the Canadian government might follow a similar move like Britain, which gave wireless companies until 2027 to remove existing Huawei gear, a longer timeframe that would result in old gear requiring replacement anyways.

Back in December 2018, unnamed telecom executives told The Globe and Mail the estimated cost for Telus and Bell to remove Huawei gear would be about $1 billion. Reuters says

In February 2019, Telus said a Huawei ban could possibly increase the cost of the company’s 5G rollout.

In June of this year, Telus selected Ericsson and Nokia for building out its 5G network, while Bell picked Nokia for its first 5G partner.

The federal government has not announced whether it will ban Huawei 5G or not, a decision approaching two years and most likely tied to the fate of Huawei’s CFO currently fighting U.S. extradition in Vancouver.

Canada’s 5G wireless spectrum auction isn’t set to take place until 2021.