Telus Corp. says it will begin building out its fifth-generation wireless networks this year with gear from Huawei Technologies Co. Ltd., even as it awaits the outcome of a federal security review.
With this move, Telus is betting that the government will allow Huawei equipment to be used in 5G networks. But if Ottawa decides to ban Huawei in 5G networks entirely, Telus runs the risk of having to rip out costly gear.
Telus has long said it prefers to have the option to use Huawei equipment, which it uses for its existing networks and is known to be cheaper than other suppliers’ gear.
Although Telus’s initial launch will utilize Huawei equipment, the Vancouver-based telecom is looking to add other suppliers into the mix, and currently has a request for proposals open, Telus’s chief financial officer Doug French said Thursday.
“Notably, in the Canadian model, Huawei equipment is restricted to the non-sensitive Radio Access portion of the network,” Mr. French said in a statement after Telus reported its fourth-quarter results.
“This approach is entirely compliant with current Canadian regulatory and cybersecurity requirements, which have been in place and approved by successive federal governments for more than a decade.”
The Canadian model – of restricting Huawei gear from the sensitive core parts of the networks – is similar to approaches being adopted in order countries, including Britain and Germany, Mr. French said.
Late last month, the British government announced that it would allow Huawei to supply components for the country’s 5G networks on a restricted basis.
Some analysts have speculated that Britain’s decision relieves some of the pressure on Ottawa to enact an outright ban against Huawei, as Canada’s federal government mulls whether Huawei should be permitted to supply equipment for Canada’s 5G wireless networks.
The United States and Australia – allies of Canada, Britain and New Zealand in the Five Eyes intelligence-sharing group – have barred Huawei from supplying equipment for their 5G systems over concerns the company presents a security threat because it could be compelled to help Beijing spy on or sabotage Western networks.
BCE Inc. announced last week that it will start deploying its 5G networks with equipment supplied by Finland-based Nokia Corp., allowing it to move forward while federal discussions over Huawei’s potential role continue. But BCE’s chief executive Mirko Bibic left the door open for involving the Chinese telecom giant in the future.
Rogers Communications Inc., meanwhile, is using gear from Swedish supplier Ericsson in its fifth-generation networks, which it has begun rolling out in the downtown cores of Toronto, Vancouver, Ottawa and Montreal. Consumers will be able to access the networks once they purchase a 5G-capable phone. Rogers will be making its first 5G devices – the Samsung Galaxy S20 5G series – available to customers on its unlimited data plans starting March 6.
Thursday’s announcement, which came after Telus reported fourth-quarter operating revenue of $3.86-billion, demonstrates the company’s eagerness to get on with building its network.
The revenue is 2.5 per cent higher than the $3.76-billion that Telus reported in the fourth quarter of 2018. However, the average revenue per user, or ARPU, for Telus’s mobile phone customers declined by 1.7 per cent to $59.29, partly owing to a decrease in overage charges.
Desjardins analyst Maher Yaghi said an acceleration in the wireless ARPU decline was “expected given the move to unlimited” data plans.
Last summer, Telus joined its competitors, Rogers and BCE, in rolling out large data plans that slow down customers’ speeds when they hit their data limits instead of charging them hefty overage charges. Overage fees had typically comprised 5 per cent of the carriers’ wireless revenue.
Mr. French said monthly fees are growing as customers move from cheaper plans to the pricier unlimited plans. However, “the overage is still declining at a greater rate,” he said.
Telus’s earnings before interest, income taxes, depreciation and amortization (EBITDA) for the fourth quarter increased by 10.8 per cent to $1.37-billion, while net income was up 3 per cent from a year ago to $379-million.
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