BT buying chief says top priority is ‘unwinding’ China reliance

BT Group Chief Procurement Officer Cyril Pourrat has described cutting reliance on Chinese technology as his “priority number one”, as the UK operator continues to up focus on geopolitical risks surrounding its supply chain.

With BT stung by a bill in the “hundreds of millions” of pounds for the government-enforced removal of Huawei Technologies’ kit from its mobile networks, Pourrat said his uppermost concern was “trying to understand if there is a way of being less and less dependent on China”.

He described environmental, social, and governance vulnerabilities as a major factor for the operator, and its procurement unit BT Sourced, going forward — but China was a “big topic” and “number one”.

Speaking during an early-October supply chain management (SCM) conference, hosted by partner riskmethods — the footage of which was uploaded online last week — Pourrat said presented a strategy on Chinese dependence to BT’s Board of Directors earlier this month.

“ So, the big priority for me is that. Can we, if we can, unwind I would say the last 20 or 30 years of outsourcing everything to China? ”

Pourrat.

Waste management

The ‘fireside chat’ at the riskmethods event saw Pourrat lay out different incentives for BT to reduce exposure to geopolitical risk around usage of Chinese technology.

Chief among these was the ongoing swap-out of Huawei network equipment, a multi-year project that BT has estimated will end up costing in the region of £500m (€574m).

The challenge of having to remove the supplier’s kit and “rebuild a 5G network” with other tech had necessitated “hundreds of millions that you are trashing into the trash bin, that you are getting rid of”, the CPO said.

BT was “very happy” to have been the first UK operator to launch 5G, via EE in May 2019 (BTwatch, #309), “and then suddenly, the government is tapping on your shoulder and saying ‘No. You remove everything’”, he said.

This not only significantly disrupted its rollout planning, but left it exposed as a buyer of replacement kit. “So, you suddenly go back to the suppliers… and you are not exactly in a good position to negotiate because, obviously, they know you have no other choice”, said Pourrat.

Pourrat referenced BT networks’ role in connecting multinational businesses, government departments, and embassies in the UK and abroad as a signal of the significance of the issue to the operator.

Let’s have some (US) chips with that

Pourrat did not go into detail on the measures he is planning to mitigate political risk around Chinese technology usage and diversify its vendor ecosystem.

There was no mention, for example, of whether (or when) BT sees network disaggregation as a viable means to increase supply optionality — a possibility on which the operator’s Networks leadership has so far been comparatively cautious, emphasising the need to maintain service quality with trusted and proven tech (BTwatch, #327 and #339).

Pourrat, a former Sprint exec, did hint that the Group could look more deeply at America, at least to extend its indirect supply base — noting that the USA is “putting a lot of effort into the semiconductors, building new factories and stuff like that”.

Several American semiconductor makers have announced plans to construct new facilities in the country, while the government is promising funding and tax incentives through the CHIPS and Science Act, passed into law in August, in a bid to reduce foreign dependence.

Top of the list

SCM has become a regular feature of board-level discussion at BT, and other operators, with the pandemic, Russia–Ukraine war, and rise in inflation seeing greater awareness of the need for supply chain transparency at the top of companies’ hierarchy.

Supply chain exposure is listed by the operator among its principal risks and uncertainties, with the area sponsored by Chief Financial Officer Simon Lowth. It notes in its Annual Report that “we use a large quantum of suppliers” — about 430 of which were deemed “critical” in 2021 — and, when buying, must “make decisions on concentration, capability, resilience, security, costs, and broader issues that could impact our reputation”.

Echoing Pourrat’s comments, BT highlights “resilience and market power of single-source vendors” and “reliance and exposure to China market volatility and geopolitics” among its key issues in the area of SCM, alongside inflation, supply shortages, supplier ethics, and cyber and data security.