Germany still looks toothless on Huawei as telcos hedge bets

Germany just can't seem to quit Huawei, a controversial Chinese telecom equipment supplier that has been turfed out of other European countries where governments see it as a security threat. Like an inveterate gambler, Germany has proven to be all talk and no lederhosen since the era of Angela Merkel, who left the chancellorship in 2021. Amid debates and proposals about giving up the Huawei habit, operators contentedly carry on spending. 5G networks continued to advance across German territory last year. Most sites use Huawei products.

Will this time be different? Three out of four German ministries involved in the decision now support a Huawei ban, according to the latest reports. It prompted Bloomberg to write in its headline that Germany is now "closing in." Under the latest plans, operators would reportedly have to remove Huawei from their core networks by January 1, 2026, before taking its products out of access and transport networks by 2029. This is "closing in" at the speed of a super tanker docking in a storm.

Legislation along these lines may be designed to appease the European Union (EU), which has regularly admonished Germany and several other countries for procrastinating. But any eagle-eyed EU official will spot the lack of teeth. Above all, Huawei's eviction from core networks is already a fait accompli in Germany.

Deutsche Telekom, the incumbent, has shifted mainly to Ericsson, although Mavenir, a US provider, seems to be in the mix, too. Vodafone Germany is also cited as an Ericsson customer in this part of the network but may be relying on Nokia for some applications, given earlier comments by a Vodafone spokesperson. As for Telefónica Germany, it recently hailed the activation of Nokia applications on an AWS platform. Most of its customers today, though, are served by Ericsson. Rules would simply acknowledge what has already been done.

The RAN looks mainly Chinese

Where operators are still heavily reliant on Huawei is in the much costlier radio access network (RAN). But here a deadline of 2029 would offer those companies the most cushioned landing imaginable. By then, 5G in Germany would be celebrating (a poor choice of word, perhaps, given the technology's failure to impress) its tenth birthday and sites would be due for a product refresh. Replacement costs, essentially, would just be a part of normal capex.

That said, operators have continued to extend the coverage of 5G networks provided largely by Huawei. In its annual report for 2023, Deutsche Telekom said 5G coverage had risen from 94.8% at the end of 2022 to 96% a year later. Telefónica Germany has boosted coverage from 80% to 95% over the same period. At Vodafone, availability has risen from 80% to 91%, according to press releases.

Barclays, a bank, puts the latest site numbers at 37,000 for Deutsche Telekom and 27,000 for each of Telefónica and Vodafone, producing a total of 91,000 sites across the three companies. In a research note obtained by Light Reading, it estimates Huawei is present at half or 45,500 of these. Replacing all these would cost about €2.5 billion (US$2.7 billion), or a bit more than €50,000 ($54,360) per site, according to Barclays. But this is very much a "worst case scenario," it points out. If operators were given several years to complete the switch, "the impact would be minimal as it would be part of the annual capex," it said.

The proportions roughly correspond with earlier research by Denmark's Strand Consult, which gave Huawei a slightly bigger share of Germany's sites. According to that research, it supplied 65% of Deutsche Telekom's 4G RAN, 55% of Vodafone's and 50% of Telefónica's. Sourcing 4G and 5G products from the same vendor tends to be more economical and less of a technical challenge than buying them from different players. Unless swapping, the typical European telco has accordingly bought 5G from its existing 4G supplier.

Even the "worst case scenario" is not that bad from the perspective of John Strand, the CEO of Strand Consult. Barclays figures of €2.5 billion equate to a one-time cost of about €18 ($19.60) per mobile customer in Germany, he said by email. A deadline of 2029 would reduce this to zero, he says. Hawkish on the topic of a Huawei ban, he thinks a date this far in the future would be "grotesque." Clearly, it would leave Huawei active in Germany's 5G infrastructure for many years.

Telcos get ready for no-Huawei future

Operators, nevertheless, have continued resisting attempts to ban Huawei in the RAN. Arguing this would add unnecessary costs to buildout, executives have insisted networks are secure enough provided Huawei is not in the control center of the core like a hijacker in the cockpit. The critics' response is usually to note that RAN infrastructure can also be governed remotely by software, making it susceptible to a Chinese attack. Nor can Huawei's hardware be managed with another company's software, despite the suggestion this would be doable in legislative proposals last year.

However the drama unfolds, it is hard to envisage a RAN role for Huawei in the 2030s unless the geopolitical winds are blowing in the opposite direction by then. Germany's operators seem to realize it, too. All are hedging their bets through trials or limited commercial deployments with additional suppliers.

Having built 4G and 5G networks with Huawei and Ericsson, Deutsche Telekom last year revealed that Nokia would supply products for about 3,000 sites, sometimes in partnership with Japan's Fujitsu by means of more interoperable "open RAN" interfaces. These sites are today served by Huawei, said Tommi Uitto, the head of Nokia's mobile networks business group, during a conversation with Light Reading at Mobile World Congress earlier this year.

Telefónica, which sources its RAN from Huawei and Nokia, is now experimenting with virtual or cloud RAN products supplied by Ericsson and Samsung. Vodafone, a RAN customer of Huawei and Ericsson, has very publicly put its entire RAN across Europe and Africa up for tender. In both the UK and Romania, where anti-Huawei rules are in place, it is already switching from the Chinese vendor to networks built mainly by Samsung. If legislation goes through, a similar move in Germany would be no surprise.