Huawei ban won’t affect its 5G rollout: BCE
Canadian telecom has not yet chosen vendor amid feds’ cybersecurity review
TORONTO BCE Inc. says the amount of time and money it needs to introduce 5G technology will not be affected if the federal government bans Huawei Technologies Co. Ltd. from supplying equipment for Canada’s next-generation mobile networks.
On a conference call with analysts Thursday, chief executive George Cope addressed the federal government’s ongoing cybersecurity review on whether to permit use of the Chinese telecom’s equipment in Canada’s 5G networks. The government is evaluating Huawei’s role after allies including the United States, Australia and New Zealand blocked it from 5G networks over fears the Chinese government could use its equipment for espionage.
Bell has used Huawei’s radio access equipment in its 3G and 4G networks and partnered with the Chinese company to test 5G technology, raising speculation it could face delays or steep costs if it had to switch suppliers.
But Cope said it’s important to note that Bell has not yet chosen a 5G vendor. Regardless of the outcome of the review, he doesn’t expect an impact on BCE’s capital expenditure program.
“If there was a ban, or if we chose a different supplier than Huawei for 5G, we’re quite comfortable all of those developments would be addressed within our traditional capital intensity envelope,” Cope said. “Nor do we think whatever the outcome is would in any way impact our timing in the market for 5G.”
Cope also noted that Bell does not use Huawei equipment in its network core, which is more critical for security. Still, he recognized the issues at play and said Bell will “manage those appropriately going forward, and of course follow the law.”
The federal government’s 5G review comes at a tense time in diplomatic relations between Canada and China. Canada arrested Huawei’s chief financial officer Meng Wanzhou in Vancouver in December after receiving an extradition request from the U.S. China subsequently detained two Canadians and sentenced a third to death (he had been previously sentenced for 15 years in prison for drug offences). In late January, the U.S. Department of Justice formally charged Meng with fraud and accused Huawei of stealing trade secrets from U.S. telecom company T-Mobile.
Still, Huawei remains one of the world’s largest telecom equipment suppliers. According to a report published Thursday by network research firm Dell’Oro Group, Huawei held the largest share of the network equipment services market in 2018 at over 30 per cent of the market.
Canada’s cybersecurity review is expected to take a few more months, but some analysts believe a Huawei ban is getting more likely.
“The odds appear to be rising that Canada could follow other countries in banning Chinese suppliers from 5G networks,” National Bank analyst Adam Shine noted to clients Tuesday.
This would have the biggest impact on Bell and Telus, both of which are planning to use Huawei for future networks and extensively use it in existing networks, Shine wrote.
“If this were to occur, BCE and Telus would have to adjust current deployment plans, seek an alternative supplier to Huawei, and likely succumb to some delays and added costs which we believe can be accommodated by the cash flow benefits to be extracted from Canada’s new accelerated depreciation policy.”
Prior to the call, BCE said it had 143,000 net subscriber additions in the fourth quarter, including 21,000 net additions to the Lucky Mobile pre-paid service that was launched in late 2017.
The subscriber additions were below a consensus estimate that projected 160,000 net additions to its mobile services, including 136,000 postpaid and 24,000 prepaid.
However, BCE chief financial officer Glen LeBlanc told analysts that the wireless segment performed well in terms of subscriber profitability and cash generation.
Wireless revenue grew 4.6 per cent from last year, driven by a larger subscriber base, a higher proportion of customers choosing larger data plans as well as increased sales of more expensive smart phones, LeBlanc said.
Overall revenue for the Montreal-based company rose three per cent to $6.22 billion from $6.04 billion, ahead of analyst estimates of $6.17 billion, according to Thomson Reuters Eikon.
On an adjusted basis, the company earned 89 cents per share, up from 82 cents per share a year ago. Analysts had estimated 86 cents per share of adjusted earnings.
However, BCE’s overall net profit was down eight per cent compared with the fourth quarter of 2017, due to higher expenses that are excluded from adjusted earnings.
Those expenses included a $190-million non-cash asset impairment charge related mainly to Bell Media’s French-language specialty TV properties, which have seen a declining subscriber base.
BCE also announced a five-per-cent increase in its common share dividend, which will rise to $3.17 per year or 79.25 cents per quarter.