Impact of a no-deal Brexit

Current Brexit news points to the possibility of a no-deal scenario with important implications for the comms sector, according to Dave Millett, Director of telecoms brokerage company Equinox.

Four areas of potential no-deal impact have been identified by Millett including EU roaming. Last year the EU abolished all the charges previously levied by the mobile operators for roaming calls and data within the EU area. If the UK were leave the EU on a no-deal basis this could no longer be the case, believes Millett. "Other countries outside the EU such have Norway have signed up to the deal, but they have also agreed economic arrangements," he said. "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."

As with all these arrangements, noted Millett, it depends 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," he added. "And the impact could 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. 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. This means 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."

The second area to impacted by a no-deal exit is trade, noted Millett. "The UK imports far more telecoms equipment than it exports," he stated. "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 at the forefront of targets for our own trade and import deals. As the fifth largest economy that makes us attractive to the handset makers and deals could lead to lower import charges and therefore lower prices.

"The weeks of 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. Should we go on WTO rules then the uncertainty could drive the pound even lower, at least in the short-term." 

Millett's third focus area is competition. Some of the biggest decisions affecting the UK market are currently 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 be down to the UK and will more closely reflect the views of the UK Government, pointed out Millett. "The EU has generally been anti-merger, the UK Government less so," he added. "It will enhance the role of Ofcom. The EU has made decisions and threatened fines against anti-competitive behaviours. Historically the UK Government has been less interventionist. 

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

Regulation and infrastructure will also be impacted by a no-deal Brexit. "Telecoms really hasn't integrated very much across Europe," commented Millett. "Each country issues its 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 - 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 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. 

"There’s still a lot to resolve and with only months to go, we must prepare for a no-deal scenario. Either way, it will make the telecoms market very interesting!"

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