No-deal Brexit: Good or Bad?
As the possibility of a no-deal Brexit deal increases what would be the impact on our telecoms if it were to happen. Is it another instance of doom and gloom or are there any upsides.
These are our thoughts on the matter…
In 2017 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 then there is nothing in there that covers roaming. I am sure the mobile operators will be pleased as it was a major revenue source for them.
Like all these bilateral arrangements it is a case as to whether the EU wants to cut its nose off to spite it face as all EU citizens could roam for free in the UK.
The impact may be longer term as UK can negotiate its own trade agreements it could similar seeks to do deals with countries it wants to encourage more trade with. So it could be free to roam between the UK and commonwealth countries for instance. It is to be hoped that this will be an element of any new trade agreements that are set up. Certainly, 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 overseas home. Should it come to fruition people should check their contracts – and add roaming plans if required.
At the moment some of the biggest decisions affecting the UK market are taken by the EU. For example, the final say on the O2 and 3 merger deal fell to European competition commissioner Margrethe Vestager. In future any such mergers will down to the UK and as such will reflect more the views of the UK Government. The EU has generally been anti merger and the UK Government has been less so. It enhances the role of Ofcom, who has constantly bottled the decision to split Openreach away 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.
It potentially leaves companies more open to overseas acquisition. Would BT be a tempting target for someone given their share price being 40% of what it was 3 years? Deutsche Telecom already own a stake in them. As general rule greater consolidation leads to less choice for customers and the potential for lower service levels and higher prices.
Like many other manufacturing industries, as a country we import far more telecoms equipment than we export. Not many mobile phones or phone systems are made here, even most of the infrastructure is imported. A lot is made in China, Asia and the USA. These countries are the forefront of targets for our own trade deals. As the fifth largest economy, the UK is attractive to the handset makers and deals could lead to lower import charges and therefore prices.
The first few weeks after the Brexit referendum saw a large drop in value of the pound, which resulted in the cost of telecoms and technology equipment going up quite quickly. Dell announced a price rise within weeks. Should we go on WTO rules after a no-deal Brexit, then the uncertainty could drive the pound 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 early.
Regulation and Infrastructure
As an industry telecoms has not integrated very much across Europe. Each country issues it own licences and phone numbers. 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.
The EU has set targets for 5G rollouts. Each country should have one city operational by 2020. The UK has continuously lagged behind most of Europe on 4G coverage and FTTP availability. The recent announcements have targets that will not improve that, but currently being in or out of the EU won’t affect that situation. It is more a question of local priorities.
The EU customs union allow 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.
Like so many other things there is a lot to resolve and we have less than 6 months to go if we are to leave on a no deal basis. But 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 that period.
What are your thoughts on a no-deal Brexit? We’d love to read them.