General feeling is the telecoms effect won’t be too big, though there may be consumer spending anxiety
Nearly three years since the UK voted narrowly in favour of leaving the European Union, that exit is – supposedly, at least – nearly here.
In the referendum vote in June 2016, the ‘Leave’ campaign narrowly edged out ‘Remain’ by 51.9 to 48.1 per cent, with over 17.4 million people voting for the UK to leave the EU.
Since the results were confirmed, British politics has been dominated by the so- called Brexit, with debate after debate in the House of Commons over how to secure the best outcome for the country.
Prime Minister Theresa May has already seen two proposed Brexit deals rejected by fellow MPs, with the process proving anything but straightforward and causing uncertainty for UK businesses.
There have been debates over a hard or soft Brexit, as well as several calls for either a second referendum or a “people’s vote”, with MPs voting in March to seek a three-month delay to Brexit until June 30.
With so much uncertainty, what does this mean for UK telecoms and its consumer and business-to-business markets?
TRADE AND SUPPLY
Trade between the UK and member states is expected to become disrupted as Britain exits the EU – which has effectively become a single market in which goods and people can move around as if within a country.
With the UK set to leave, many also expect the value of the pound to suffer against the euro – at least in the short term.
This is a “real concern”, says Nigel Prince, managing director at distributor New Way International. “There’s a big worry about how the currency will become affected as result of Brexit. It’s a real concern how strong the pound will be against the euro and US dollar.”
There may also be supply chain issues, says Imran Choudhary, director for technology at research company GfK.
“Aside from the currency, other negative impacts are likely to include disrupted supply chains and logistics, and higher admin costs,” he says. “For the B2B industry it will have an impact on what it will be able to export.”
In addition, concerns have been raised over a potential return of roaming charges for using data when abroad in the EU.
However, Three (for one) has announced that it will not add any additional roaming costs, regardless of the final Brexit outcome.
Three CEO Dave Dyson said “We’re committed to eradicating excessive roaming charges and will retain this customer benefit regardless of Brexit negotiations, allowing our customers to continue using their usual allowances when they travel within the EU.”
Following Three’s announcement, CCS Insight senior analyst Kester Mann believes it will be difficult for any of the other operators to apply additional costs for roaming.
“I don’t think operators will revert to this, as the UK is such a competitive market – plus these operators already offer roaming outside the EU as a differentiator.”
“In theory the operators could introduce this but if the operators backtrack on this because it could be risky for them.”
There are also questions over consumer confidence during the period of uncertainty caused by Brexit.
This comes on top of several factors that have already contributed to a decline in the UK smartphone market in recent years, as it has matured.
Increased product lifecycles, better hardware and higher prices have led to consumers holding onto their phones for longer – and Mann believes that although these struggles would continue even in the absence of Brexit, the UK’s departure from the EU will not help the market.
“The downward trend will continue with or without Brexit, despite the innovation we saw at the Mobile World Congress,” he says. “However, with Brexit we might see that consumer confidence won’t be as strong, as people will be more nervous about making big investments.”
Choudhary, meanwhile, says that British consumers have been “stoic” in the face of the unknown, but does foresee a downturn in SIM-free handset sales.
“These sales will come under increasing pressure,” he says. “They are currently on a growth trajectory, but this could be dampened by Brexit. Consumers may be less likely to spend money on brand new phones.”
With Brexit looming, many businesses will have planned for the future with this in mind – something that has been the case for New Way.
The distributor, which has a business in Germany, opened a further centre in the Dutch city of Rotterdam in September.
In the event of Brexit, this international presence also offers backup for the business, including staff, logistics functions and a warehouse.
Despite not being too concerned about the UK’s departure harming how New Way operates, Prince says that having a plan to cater for it is essential.
“We’re one of the more fortunate UK businesses, as we already have an established business out in Germany,” he says. “With this, we have staff, logistics and a warehouse, and this offers us a backup plan.”
Prince adds: “We’re ready to do what we need to do, whether that is moving stock around or selling stock in Europe directly.”
Meanwhile, vendor Alcatel has said it has been planning ahead for the worst-case scenario in the event of Brexit, inlcuding for the possibility of a no-deal outcome.
At the Mobile World Congress, Alcatel’s UK and Ireland country director William Paterson told Mobile News that the firm has planned for the worst when it comes to potential stock issues.
“We planned and reorganised the supply chain to bring in products in a sufficient manner,” he said. “We will be bringing products directly from China to the UK and avoiding customs in Paris.”
There is also a question surrounding whether Brexit will affect the launch of 5G in the UK, given the investment required at a time of uncertainty.
Operators EE and Vodafone plan to debut the technology this year, with EE launching in 16 cities and Vodafone in 19 this year.
Mann doesn’t believe, however, that 5G rollout will be affected, as the infrastructure is already in place.
“I don’t expect 5G to be impacted by Brexit,” he says. “EE in particular is determined to be at the forefront of this and Vodafone isn’t far behind.
“It seems to be full steam ahead for 5G, and the operators seem to be pushing on with plans rather than reining them in. It appears that Brexit isn’t influencing this, which is quite encouraging.”
Choudhary agrees, adding that he doesn’t think the UK will fall behind with 5G because the investment has already been put in place.
“5G is critical to the development of the mobile industry,” he says. “The capital expenditure required for 5G has already been thought of and all the mobile operators are working towards this.”
Choudhary does, however, believe that the Brexit situation could affect SMEs and larger businesses.
“Brexit might have a broader impact on the SME and corporate landscape in the UK, as a lot of these businesses might be planning investment in IT and telecoms infrastructure,” he says. “The uncertainty around Brexit might put them off investing in 5G hardware.”
While Brexit is anticipated to be a challenge for the UK’s telecoms industry, will there be any positive outcomes for the telecoms industry?
Some think so – or, at least, that the impact will be relatively neutral. Edward Elliot-Square, sales director at phone trader IPT.cc, says, for instance that the uncertainty doesn’t phase him.
“I’m not worried at all,” he says. “I think it is going to be positive for the industry if anything, in particular for the mobile industry.”
Elliot-Square believes the UK will be able to control its own laws and regulations, and could even become a focal point for trade.
“There will be new rules to adhere to, but this might even see the UK become a trading hub, the likes of which we see in Switzerland and Dubai,” he says. Under this scenario, he explains, other countries could “trade with confidence” with the UK because they would be dealing only with that country.
Elliot-Square also believes that from a mobile manufacturer perspective, little will alter.
“Most, if not all, of the mobile manufacturers are outside the EU, so nothing is going to change. There’s no duty on the movement of mobile phones across Europe, so I don’t see how there can be an issue with Brexit,” he says.
Eurostar Global Electronics MD Peter Carnall, meanwhile, says it will be “business as usual” once the UK leaves the EU.
Carnall shot down fears that Brexit will slow down goods entering the UK and revealed that the distributor has explored contingency options over the past two years.
“There’s not going to be a delay on products entering the UK; if we leave the EU, the goods will still come to us at the same speed they do now,” he says.
“There’s a fallacy that the doors are going to come down and goods will take forever to be shipped. I don’t think the UK government will allow that to happen.”
Although it is difficult to forecast the UK’s future with Brexit on the horizon, the shared feeling among those in the mobile industry is therefore that the impact won’t be too detrimental.
But Choudhary thinks it is a case of playing the waiting game before the full implications of Brexit for the mobile industry can be determined.
“Although most businesses will have planned for Brexit, it’s difficult to know exactly what will happen, and the long- term effects won’t be known for years,” he says.
He believes the final impact of the UK leaving the EU will hinge on how much of a hit there will be on consumer and business confidence in spending.