£1bn wiped off BT: Shares slump 7.4% and profits fall as telecoms firm is hit with a soaring business rates bill and the £500m cost of Huawei 5G cap
Nearly £1.3billion was wiped off BT’s value after it said restrictions on kit made by China’s Huawei would cost it dearly.
The telecom company’s shares plunged by 7.4 per cent, or 12.94p, to 162.4p after it warned that ripping out equipment and replacing it would cost half a billion pounds.
BT boss Philip Jansen said a 35 per cent cap on Huawei’s market share of 5G equipment – announced by the Government on Tuesday – meant that more kit would need to come from other suppliers.
Shares hit: BT boss Philip Jansen said a 35 per cent cap on Huawei’s market share of 5G equipment meant that more kit would need to come from other suppliers
President Trump had been pressing the UK to impose an outright ban on Huawei’s equipment over concerns it could spy for Beijing – a charge the company has repeatedly denied.
But in a compromise deal, the UK will instead only ban Huawei from involvement in ‘core’ infrastructure which handles the most sensitive data.
It will also be restricted by the 35 per cent market share cap.
£1bn business rates bill
BT is facing a business rates bill of £1billion for fibre optic broadband cables it is laying.
Boss Philip Jansen said the money that the firm will pay over 20 years would be better spent on improving its network.
He said £1billion was enough to roll out fibre cables to 3m homes.
Pressure is growing on the Government to overhaul the business rates system.
He said: ‘They give the industry a subsidy on one hand, then a tax on the other.’
He said if broadband companies got more relief on rates, BT would be ‘in a strong position’ to ramp up its roll out.
This means no operator – from BT and Vodafone to Three and O2 – can have a network with more than 35 per cent of its kit, including masts and antennae, supplied by Huawei.
BT is a heavy user of Huawei kit – with more than 35 per cent currently coming from the Chinese firm – and Jansen said the new rules would cause some upheaval.
The company is rolling out masts, antennae and other kit used for 5G – or fifth generation – mobile services across the country and the changes are expected to affect older kit as well.
Jansen added: ‘Inevitably, because of the way that the network works on 4G and 5G, there will be some 4G boxes that are Huawei that will have to be eradicated.
‘And then there’s also an assumption around what the pricing scenarios might be with alternative providers.’
The setback for BT complicates Jansen’s efforts to ramp up the rollout of cutting edge mobile services and broadband, which is seen as a top priority by Boris Johnson’s Government.
The Huawei restrictions mean BT and its rivals will have to buy more equipment from pricier suppliers such as Nokia and Ericsson, although Jansen said he hoped more competitors would emerge in future.
He said Johnson’s aim to get fibre optic broadband coverage across the UK by the mid-2020s would require a ‘Herculean collaborative effort’ by the telecoms industry.
At the moment fibre cables run to many roadside cabinets but the wires going into most homes are still made of copper, dramatically reducing internet speeds.
BT has pledged to roll out fibre to 4m homes and businesses by March 2021 but it is seeking help from the Government before committing to reaching another 11m.
Along with other firms, it has called on ministers to make it easier for operators to get access to land and buildings and for relief on business rates which are levied on new fibre cables.
Jansen said: ‘Boris’s objective is possible – it is just very, very hard and we have no time to waste.’
The Huawei blow emerged as BT gave a gloomy third quarter update to investors.
The firm said revenues fell from £17.6billion to £17.2billion in the nine months to December 31, a result that was weaker than analysts had expected.
Profits also dipped from £2.1billion to £1.9billion. BT said it had ploughed £2.9billion into its fibre and 5G rollouts, up by £251million a year ago.
Russ Mould, investment director at AJ Bell, said: ‘For now this looks like a company stuck in the mud.’