How could a no-deal Brexit affect business telecoms?

By: Dave Millett

Date: 11 September 2018

How could a no-deal Brexit affect business telecoms?As the possibility of a no-deal Brexit increases, so does the potential for big impacts on telecoms provision in the UK. Is it another cause for concern for businesses - or are there some potential benefits?

Here are the four main areas where there we may see impacts.

1. Competition and service

At present, some of the biggest decisions affecting the UK telecoms market are taken by the EU. For example, the final say on the O2 and 3 merger deal fell to the European competition commissioner, Margrethe Vestager.

In future, any such merger decisions will be down to the UK, and, as such, will more closely reflect the views of the UK government. The EU has generally been anti-merger, and the UK less so. It will also enhance the role of Ofcom, which has constantly bottled the decision to split Openreach away from BT.

Brexit also potentially leaves UK companies more open to overseas acquisition. Would BT be a tempting target for someone, given their share price is 40% of what it was 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.

2. Trade and pricing

The UK imports far more telecoms equipment than we export. Not many mobile phones or phone systems are made here - even most of the infrastructure is imported.

As one of the world's largest economies, the UK is attractive to overseas handset makers. Deals could lead to lower import charges and, therefore, lower prices.

However, post-Brexit negotiations have seen, and 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.

The uncertainty of a no-deal Brexit could drive the pound even lower, at least in the short term. If your business is considering replacing your phone system and data infrastructure, it may pay to order early.

3. Roaming

All charges previously levied by the mobile operators for roaming calls and data within the EU area were abolished by the EU in 2017. 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 end up operating on World Trade Organisation arrangements, there is nothing in there that covers roaming charges. I am sure the mobile operators will be pleased, as it was a major revenue source for them.

As with all these arrangements, it does depend on whether the EU wants to cut its nose off to spite its 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 when the UK can negotiate its own trade agreements it could seek to do similar deals with countries it wants to encourage more trade with. So, it could end up being 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 businesses working in Europe. Should it come to fruition, they should check their contracts - and add roaming plans if required.

4. Integration

Telecoms hasn't integrated very much across Europe. Each country issues its own licences and phone numbers. There are no minimum standards for 4G coverage or broadband speeds, although the EU has suggested minimum target speed should be 30 mbps - which is higher than that in 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 fibre to the premises (FTTP) availability. Being in or out of the EU won't affect that situation. It is more a question of local priorities.

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

With only around eight months to go, there's still a lot to resolve. Businesses must prepare for a no-deal scenario, and should be asking key questions when signing any long-term contracts that extend beyond the exit period.

Sponsored post. Copyright © 2018 Dave Millett, independent telecoms brokerage Equinox.