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How will a no-deal Brexit affect business and residential telecoms?

Equinox's Dave Millett explores how phone, mobile and broadband could be affected by a no-deal Brexit

How will a no-deal Brexit affect business and residential telecoms?
Logo of Channel 4 game show Deal or No Deal, hosted by Noel Edmonds
  • Dave Millett
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With prime minister Theresa May's Chequers proposals looking increasingly lifeless and the House of Commons seemingly stalemated on any kind of Brexit deal, the possibility of a no-deal Brexit has never been higher.

But what would the impact be on UK telecoms of a no-deal Brexit? Will it be a disaster or could there be some positives to take away?

Here is a look at the main areas where a no-deal Brexit could affect both businesses and consumers.

Competition and pricing

Currently, some of the biggest decisions affecting the UK market are taken by the European Union (EU). The final say over the proposed merger of O2 and Three, for example, fell to European competition commissioner Margrethe Vestager. In future, any such mergers will be down to the UK and, as such, will more closely reflect the views of the UK government.

In recent years, the EU has generally been anti-merger, and the UK government less so. Brexit will enhance the role of Ofcom, which has repeatedly ‘bottled' the decision to split the Openreach infrastructure division from BT. The EU has made decisions and threatened fines against anti-competitive behaviours by companies such as Microsoft and Google. Historically, the UK government has been less interventionist.

Also, it potentially leaves companies more open to overseas acquisition. Would BT be a tempting takeover target, given that its share price is 40 per cent of what it was just three years ago? Deutsche Telecom already owns a stake in BT. As a general rule, greater consolidation leads to less choice for customers, and the potential for lower service levels and higher prices.

Infrastructure

The telecoms industry has not integrated much across Europe. Each country issues its own licences and phone numbers and there are no minimum standards for 4G coverage or broadband speeds. Although the EU has stated it believes the minimum target speed should be 30 mbps - which is higher than the UK's current minimum standard.

The EU has set targets for 5G rollouts: each country should have one city operational by 2020. However, the UK has continuously lagged behind most of Europe on 4G coverage and fibre-to-the-premises (FTTP) availability. Recent announcements have targets that won't improve that, but being in or out of the EU won't make a difference to that either way.

The EU Customs Union allows member states to charge higher international termination rates to non-EU members so the UK would be free to break from that and make the cost of calling here from abroad lower and therefore more attractive to businesses to have overseas offices here.

Roaming

Last year, the EU abolished all the charges previously levied by the mobile operators for roaming calls and data within the EU area. Should the UK leave the EU on a no-deal basis, this could no longer be the case. Other countries outside the EU such have Norway have signed up to the deal, but they have agreed economic arrangements as well. If the UK is operating on World Trade Organisation arrangements, there is nothing in there that covers roaming. I'm sure the mobile operators will be pleased as it was a major revenue source!

It does depend on whether the EU wants to cut its nose off to spite it face - by allowing us to roam, they will also have to allow all EU citizens to roam for free in the UK.

The impact may be longer term, as the UK can negotiate its own trade agreements it could seek to do similar deals with countries it wants to encourage more trade with. For example, it could be free to roam between the UK and Commonwealth countries. Hopefully, this will be an element of any new trade agreements that are set up. It has been discussed in the initial conversations between the UK and USA.

So, there are potential implications for tourism, business people working in Europe and those with an overseas home. Should it come to fruition, people should check their contracts - and add roaming plans if required.

Trade

The UK imports far more telecoms equipment than it exports. Not many mobile phones or phone systems are made here any more, even most of the infrastructure is imported. Most of it is made in China, Asia and the US. These countries are at the forefront of targets for our own trade deals. As the world's fifth largest economy, that makes us attractive to the handset makers, and deals could lead to lower import charges and, therefore, lower prices.

Post-Brexit, negotiations have seen, and will continue to see, a drop in the value of the pound. This has resulted in the cost of telecoms and technology equipment going up. In turn, prices to the end user have also increased quite quickly.

For example, Dell announced a price rise within weeks. Should we leave the EU on World Trade Organization (WTO) rules then the uncertainty could drive the pound even lower, at least in the short term. If that seems the likely option and your business is considering replacing your phone system and data infrastructure it may pay to order sooner rather than later.

Undoubtedly, there is still a lot to resolve and with only about six months to go, we have to prepare for a no-deal scenario. Either way, it will make the telecoms market very interesting and it means businesses should be asking key questions when signing long term contracts that extend beyond the exit period.

Dave Millett has more than 35 years' experience in the telecoms sector. He has worked in European director roles for several global companies and now runs Equinox, an independent brokerage and consultancy firm.

He works with companies, charities and other organisations to help them cut their communications bills - sometimes by as much as 80 per cent. He also regularly advises telecom suppliers on their products and propositions. He can be contacted via Twitter and LinkedIn.

 

 

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