Telus Warns Huawei Ban Could Increase Cost, Timeline of 5G Network Deployment

Telus announced their Q4 2018 earnings today, which saw profit increase at the company by 4% to $368 million. The company also released a filing detailing its upcoming 5G plans and how a potential government ban on Huawei would affect the future of their next-generation network.

The federal government has not decided on whether or not to ban Huawei, as part of its 5G network security review. Canada’s Five Eyes intelligence allies have already banned Huawei, specifically the U.S., New Zealand and Australia.

The Telus filing says if the Trudeau government bans Huawei, without compensation for the company in return, it could increase the cost of the Telus 5G network and its deployment timeline:

“A decision prohibiting the deployment of Huawei technology without compensation or other accommodations being made by the Government of Canada could have a material, non-recurring, incremental increase in the cost of TELUS’ 5G network deployment and, potentially, the timing of such deployment.”

Telus says if a ban happens, only two vendors would be available for 5G equipment, therefore increasing costs “for all operators”. An increase in cost to Telus could theoretically be passed to customers in the form of price increases for 5G and other services:

“In the case of a ban, there is a risk that the Canadian telecom market would undergo a structural change, as a reduction to an only two global supplier environment could permanently affect the cost structure of 5G equipment for all operators.”

Huawei 5G equipment is attractive because their prices undercut European players Nokia and Ericsson. Telus said it has not decided on a 5G hardware supplier yet.

Telus adds their Huawei partnership over the past 10 years has allowed them to “utilize the most advanced technology in a cost-effective manner in our advanced 3G and 4G networks without any security incidents.”

The Telus radio access network uses nearly 100 per cent of equipment from Huawei, reports The Globe and Mail, while Bell’s radio access network uses 60-70 per cent.

During Bell’s previous earnings call, CEO George Cope reassured investors by saying the company and their 5G plans would not be affected by a Huawei ban.

Telus saw revenue increase 6.3% in Q4 to $3.76 billion, while 112,000 new net postpaid wireless subscribers were added, despite a slight drop (0.7%) in average billing per user (ABPU) to $66.80, due to fewer data overages by customers because of larger data plans offered.