Prime Minister Boris Johnson may give Huawei a lifeline in Britain. Bernard Hickey explains what’s at stake here in New Zealand for the telecommunications, defence, security and trade sectors.

Spark, Vodafone, 2 Degrees, the GCSB, MFAT and the Cabinet are on tenterhooks.

British Prime Minister Boris Johnson signaled overnight he will let Huawei in to build some of the fringe of Britain’s 5G network. A decision and announcement is expected imminently.

Spark is watching the British decision closely with a view to reapplying to the GCSB to allow Huawei to build some of the fringe of its 5G network. That would put our Government on the spot again, squeezed between its largest trading partner and America’s attempt to contain China. (See my backgrounder from last week .)

The FT reported that the UK ministers wanted to impose a cap on Huawei’s market share.

Boris Johnson said: “There’s no reason why we shouldn’t have technological progress here in the UK, allow consumers, businesses in the UK to have access to fantastic technology, fantastic communications, but also protect our security interests and protect our key partnerships with other security powers around the world.”

Which means he wants his ‘special relationship’ cake and also wants to also be able to eat ‘it’ (the lower cost and faster rollout benefits of a Huawei-powered 5G fringe) too.

This decision could tilt or carve up the defence, security and trade landscapes for years to come.

However, US Secretary of State Mike Pompeo warned Johnson again on Monday that America expected Britain to reject Huawei outright. The US Senate may legislate to withdraw intelligence cooperation from 5 Eyes partners that let in Huawei.

The bottom lines? This decision could tilt or carve up the defence, security and trade landscapes for years to come. It could accelerate or decelerate the rollout of cheap 5G networks that transform the economy in the same way 4G plus smart phones revolutionised taxis, hotels, telecommunications and media. It could sharply weaken the competitive forces containing inflation.

This decision due by midnight tonight could carve up the old Anglo-American-Canadian-Australian-Kiwi Five Eyes alliance into two camps: NZ, UK and Canada vs Australia and America, both of whom have banned Huawei.

It will also set the strategic agendas and investment strategies for Spark and 2 Degrees, with Vodafone NZ watching on closely. Spark’s 4G network is built mostly with Huawei kit, particularly out at the base station level. 2 Degrees is completely reliant on Huawei for both its kit and its vendor financing.

Even the RBNZ should care, because three-way competition in telecommunications over the decade drove prices as much as 90 percent lower in a sector sucking in increasingly large chunks of economic activity. Inside the central bank it was known as the 2 Degrees effect.

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