UK bans Huawei from 5G network

Operators such as BT (BTGOF) and Vodafone (VOD) have been given until 2027 to remove existing Huawei equipment from their 5G networks, the UK government announced on Tuesday. Digital and Culture Minister Oliver Dowden said new US sanctions imposed on the company in May had “significantly changed” the landscape.

The decision is a big win for the Trump administration, which has been pushing allies to exclude Huawei from their 5G networks. US Secretary of State Mike Pompeo declared last month that “the tide is turning against Huawei as citizens around the world are waking up to the danger of the Chinese Communist Party’s surveillance state.” But it risks a backlash from China as Britain looks for new trading opportunities around the world after Brexit and will delay the rollout of 5G across the country by a year.

That triggered another UK security review of the company’s involvement in the British network, leading to Tuesday’s decision by the National Security Council to order the phased removal of its technology.

The decision is a huge blow for Huawei, which has operated in Britain for 20 years. Europe is a key market for the company, accounting for 24% of sales last year. Huawei on Monday announced half year results earlier than usual, reporting slower revenue growth. The company is already experiencing a decline in smartphone sales, after Washington blocked it from accessing popular Google apps. The phones became a lot less attractive in markets outside of China as a result.

“Based on the current direct export rule that the US put on, I really think that Huawei’s 5G equipment business is in grave danger,” Jefferies analyst Edison Lee said last month.

UK Prime Minister Boris Johnson had faced mounting pressure from lawmakers within his own party, along with the Trump administration, which argues that the Chinese government could use Huawei for spying and even sabotage.

Washington had warned that US-UK intelligence sharing and military collaboration could be put at risk if Britain went ahead with its plan. Under Chinese law, Chinese companies can be ordered to act under the direction of Beijing. Huawei has consistently denied that it would help the Chinese government to spy, and says it is “100% owned by employees.”

Speaking early Tuesday before the UK announcement, China’s Foreign Ministry repeated a previous warning by its ambassador that the decision would have consequences for the wider relationship between the two countries.

“Whether the UK can provide an open, fair and non-discriminatory business environment for Chinese companies … is a litmus test for British markets after Brexit, and it is also an indicator for China’s investment in the UK,” foreign ministry spokesperson Zhao Lijian said.

— Sherisse Pham contributed to this article.