Vodafone share price could fall further after Huawei 5G equipment ban

Shares in Vodafone opened lower on Wednesday and could potentially fall even further this week after the UK government ordered British telecoms companies to remove all Huawei equipment from their 5G networks by 2077.

Vodafone could have seen a sharper decline in its share price on Wednesday, but thankfully the UK government opted to give telecoms companies a longer runway for removing the Chinese firm’s 5G kit than the two years suggested by the press earlier this week.

Interestingly, the 15-day simple moving average (SMA) for the stock crossed below the 50-day SMA on Tuesday, signalling a possible downtrend in momentum for Vodafone.

Vodafone opened 1% lower in early morning trading on Wednesday, with the stock at 125p per share at the time of publication and down 15% year-to-date.

UK government bans purchase of Huawei 5G components

Media secretary Oliver Dowden confirmed that British telecoms providers will be banned from buying 5G equipment produced by Huawei from the end of this year, with MPs eager to phase out the Chinese firm’s technology from its infrastructure over national security concerns.

‘The NCSC (National Cyber Security Centre) has now reported to ministers, that they have significantly changed their security assessment of Huawei’s presence in the UK’s 5g network,' Dowden told MPs.

‘This has not been an easy decision, but it is the right one for the UK telecoms networks, for our national security and our economy, both now and indeed in the long run,’ he said.

‘By the time of the next election, we will have implemented in law an irreversible path for the complete removal of Huawei equipment from our 5G networks.’

Unsurprisingly, Beijing and Huawei are not happy with the UK government’s decision, with the Chinese firm warning that the move ‘threatens to move Britain into the digital slow lane, push up bills and deepen the digital divide’.

Meanwhile, the Chinese ambassador to the UK, Liu Xiaoming, urged the government to reconsider its ban on Huawei equipment and warned that there would be serious consequences if Britain continues to treat China as a ‘hostile country’.

Deutsche Bank eyes signifcant gains for Vodafone stock

For Vodafone and its peers like BT, the decision by the UK government to ban Huawei 5G kit is yet another setback this year and will hinder their development of essential communications infrastructure across the country.

However, analysts at Deutsche Bank remain optimistic about the Vodafone, with the German lender reiterating its ‘buy’ rating and issuing a target price of 225p per share – implying a potential upside of 80% for the stock.

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