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The agreement, which knocks a modest $400 million off the original $16.2 billion price tag, ends weeks of corporate fighting and puts the French group in a position to be a dominant force in jewellery.

PARIS, France — After weeks of public acrimony, LVMH and Tiffany’s mega-deal is back on track at a reduced price — and set to reshape the luxury industry.

The multi-billion dollar merger between the French luxury conglomerate and American jeweller was always a game changer, positioning LVMH as a major force in the hard luxury market currently dominated by rival group Richemont. But the pandemic threw the partnership into jeopardy, upending the projections on which the deal was priced and prompting a public and aggressive legal tit-for-tat that foreshadowed behind-the-scenes negotiations to revalue the agreement.

Under the new deal, LVMH has knocked roughly $400 million off its original acquisition price of about $16.2 billion. It’s a relatively modest discount that preserves LVMH’s reputation as a hard-charging negotiator, but was also clearly palatable to Tiffany’s board. It is expected to close early next year, pending shareholder approval.

In spite of the public acrimony, the logic of the merger was always compelling: the tie up between the two brands will be formidable, elevating LVMH’s already solid lead in the luxury sector and helping the conglomerate further diversify. LVMH already owns champagne, cognac, perfumes, hotels, duty free stores and retailer Sephora, but Louis Vuitton and Dior remain the biggest drivers of growth — and the handbag business is more competitive than ever. With both Tiffany and Bulgari in its stable, it will be in a stronger position to compete with Richemont, which owns Cartier and Van Cleef & Arpels.

That’s also because of Tiffany's supply chain, which is essentially vertically integrated. As the luxury industry has consolidated over the past 20 years, the major players — including LVMH, Chanel and Hermès, and to an extent Kering — have bought up supplier after supplier, ensuring they have complete control over their product, from material to shop floor. Tiffany's manufacturing capabilities will also benefit Bulgari and the group's other hard luxury players, as well as any other jewellers it acquires in the future.

While viewed in some circles as less prestigious than Cartier, Tiffany's global name recognition is nonetheless extremely important in an industry that remains largely unbranded. In the past, Richemont was able to dominate the market simply by maintaining the Cartier and Van Cleef & Arpels brand value: it was a business built on steady, if sometimes slow, growth and hefty profits. However, as the upscale watch market is squeezed — particularly at the lower end, where $1,000 timepieces have been replaced by Apple Watches or simply by smartphones — and its other, less cared for groups (namely, fashion and online retail) lag behind competitors, Richemont cannot rely upon Cartier and Van Cleef alone to carry it.

Especially as Tiffany is about to get a significant boost with the support of the largest luxury group in the world. The jeweller has lagged in modernising its retail stores and marketing campaigns, but joining LVMH brings it into the fold of an industry titan whose size gives it significant leverage with multi-brand retailers, real estate developers, magazines, influencers and other key players in the fashion ecosystem. It will also provide investment firepower to turbocharge the transformation. If anyone can make Tiffany globally relevant — especially in China, where it's growing rapidly — it's LVMH.

The new agreement also spares both companies a prolonged legal battle that looked likely as the deal went south this fall. LVMH said in September it was backing out of the deal, in a move many saw as a bid to secure a lower price. Tiffany responded by suing the company in a Delaware court. LVMH counter-sued, alleging the jeweller mismanaged its business during the pandemic, giving it grounds to get out of the deal.

Things got uglier. Tiffany accused LVMH of a “blatant attempt to evade its contractual obligation” while LVMH called Tiffany “a mismanaged business that over the first half of 2020 hemorrhaged cash...with no end to its problems in sight.”

But despite the wider luxury malaise, both companies have enjoyed unexpectedly swift recoveries, which may have helped ease pricing jitters. LVMH’s fashion sales returned to double-digit growth, buoyed by high sales in China, though its hard luxury division lagged. Tiffany said earlier this month that its sales have been rising through October and fourth-quarter earnings are expected to see a solid increase from a year earlier.

“The Tiffany brand is an ideal fit for LVMH,” Gam Luxury Brands Fund Investment Manager Swetha Ramachandran said in a note. “The company has emerged from Covid-19 a relative winner in an environment where trusted brands are winning with consumers.”

In the end, it was unlikely that LVMH Chairman and Chief Executive Bernard Arnault would have let Tiffany go. He has been eying the company for decades, and would have likely only gone to court to save the deal, not to stop it. This outcome allowed LVMH to save a little face, and for Tiffany shareholders to profit from what is still set to go down in history as one of luxury's blockbuster moments.

The coronavirus has done nothing to hamper sales of Hermès bags, and Privé’s owners have eyes toward acquisition or outside investment.

Nikkei +1.39% Hang Seng +1.28% CSI +0.37% Shanghai -0.11% Shenzen +0.94%

Eur$ -0.11% CNH 6.6898 CNY 6.6880 JPY 104.73 GBP 1.2907 CHF 0.9175 RUB 79.7521 TRY 8.3672 WTI$ 34.54 -3.49%

S&P +0.04% Nasdaq -0.01% EuroStoxx -0.05% FTSE -0.30% Dax +0.00% SMI

Macro :

- Brexit Negotiators Move Close to Breaking Impasse Over Fish

- CHINA OCT. MANUFACTURING PMI AT 51.4; EST. 51.3

- ‘Hydrogen Wars’ Pit Europe v. China for $700 Billion Business

- Faced With Hard Science, Johnson Hopes Lockdown Saves Christmas

- SCMP: Ethiopia, Egypt and Sudan restart Nile mega-dam talks

- Speculators Boost Bullish U.S. Stock Bets to Highest Since 2019

Keep an eye on :

- AA/ LN : Davidson Kempner Eyes Role in AA Takeover Talks: Sunday Times

- ADAPT SS : Adapteo 3Q Comparable Ebitda Beats Estimates

- ADXN SW : Addex, Indivior Research Agreement Extended Until 2021

- AED BB : Aedifica Buys Belgian Care Home for About EU22m at 4.25% Yield

- AF FP : Dutch govt says a bailout package for KLM placed on hold after pilots union rejects wage freeze - Union refused to accept a freeze on wage increases through 2025

- ARJOB SS : Arjo Targets Higher Organic Sales Growth With New Strategy

- BELL SW : Bell Food Group Nominates Joos Sutter to Succeed Chairman Loosli

- IAG LN : Airlines Suffer Blow as England Bans Non-Work Overseas Travel

- BW NO : BW Energy to Convert Two Jack-Up Rigs for Dussafu Developments

- COFB BB : Cofinimmo to Buy Four Care Homes, Brussels Office for ~EU195m

- CRBN NA : Corbion Maintains FY Organic Net Sales Growth +4% to +7%

- CSGN SW : CS Contemplates Ending Business With Commodity Trading Cos: SZ

- DNKN US : Dunkin’ Will Be Acquired by Inspire Brands in $11.3 Billion Deal

- EZJ LN : Easyjet Boss Fears Rival Airlines Will Use State Aid to 'Grab Market Share'

- EQNR NO : Equinor Makes Minor Gas Find Near Maria in Norwegian Sea: NPD

- EQNR NO : Equinor Sets Ambition to Reach Net-Zero Emissions by 2050

- RF FP : Eurazeo, IK IX Fund Will Each Invest Nearly EU200m in Questel

- NK FP : Imerys 3Q Current Ebitda Falls 15% to EU165m

- KDS NA : Sanofi to Acquire Entire Kiadis Share Capital for EUR5.45 Per Share Via Public Offer (+272% vs Fri. Close)

- MRK GY : Merck KGaA Granted FDA Orphan Drug Status for Tepotinib

- MRL SM : Merlin Should Retain Cash to Control Debt, CEO Tells Economista

- NESN SW : Nestle Buys At-Home Meal Provider Freshly in $950 Million Deal

- NETS DC : Nexi Leading Talks to Buy Nets in $10B All-Stock Deal: Rtrs

- NEXI IM : Nexi Leading Talks to Buy Nets in $10B All-Stock Deal: Rtrs

- NLSN US : Nielsen Announces Sale of Global Connect Business to Advent International for $2.7 Billion

- NYR BB : Belgian Court Orders Inquiry Into Nyrstar-Trafigura Relationship

- PNL NA : PostNL 3Q Normalized Ebit Misses Estimates

- RNO FP : Nissan to sell only electric or hybrid cars in China by 2025 - Nikkei

- RR/ LN : Rolls-Royce Plans Sale of Bergen Engines Unit, Telegraph Says

- RYA ID : Ryanair Expects to Record Higher Losses in 2H Than in 1H

- SBRY LN : Sainsbury Considering Sale of Banking Unit, Sky News Reports

- SAN FP : Sanofi to Acquire Entire Kiadis Share Capital for EUR5.45 Per Share Via Public Offer

- SANN SW : Santhera Pharmaceuticals Secures Additional Funding; to Cut Jobs

- SDRL LNO : Seadrill Forbearance Pacts Expire; Continues Stakeholder Talks

- SEM PL : Semapa 9M Net Income EU72.8M

- SHL GY : Siemens Healthineers 2021 LFL Sales Growth View Misses Avg. Est.

- SHL GY : Siemens Healthineers Seeks to Bolster Earnings, Sales in 2021

- Sportsradar IPO : Sportsradar Seeks U.S. IPO for Up to $10 Billion, Telegraph Says

- SWECB SS : Sweco Valuation Has Reached Unsustainable Highs: Dagens Industri

- 8TRA GY : Navistar, Traton Expected to Get Definitive Deal Soon, CTFN Says

- TXGN SW : TX Group Sees About CHF18m Impairment After Trendsales Disposal

- UBSG SW : UBS Deepens Mideast Footprint With Foray Into Qatar Wealth (1)

- UCB BB : UCB Says Bimekizumab Phase 3 Met Primary, Secondary Endpoints

- UCB IM : Italy Offers UniCredit New Incentives on Paschi, Ansa Says

- UMI BB : Umicore Sees FY Adjusted Ebit EU465M to EU490M, Est. EU480.0M

- URW NA :Unibail 9M Adjusted Recurring EPS EU6.57

- URW NA : Unibail-Rodamco-Westfield Nine-Month Result Hurt By Pandemic

- VOW3 GY : Audi Lineup to be All But Electric by 2030, CEO Tells Augsburger

- VOW3 GY : Volkswagen to Invest EU60 Billion to Become CO2-Neutral by 2050

>>> Up

* Deutsche Wohnen Raised to Buy at Jefferies

* Elisa Raised to Hold at HSBC; PT 42.50 euros

* Glaxo Raised to Buy at Liberum

* Grand City Properties Raised to Hold at Jefferies

* Hoist Finance Raised to Buy at SEB Equities; PT 39 kronor

* LEG Immobilien Raised to Buy at Jefferies

* Nestle PT Raised to 125 Swiss francs at Morgan Stanley

* Nexans Raised to Outperform at Credit Suisse; PT 54 euros

* NKT Raised to Outperform at Credit Suisse; PT 220 kroner

* Olvi Raised to Buy at SEB Equities; PT 50 euros

* Orchid Island Raised to Buy at Ladenburg Thalmann

>>> Down

* Barco Cut to Neutral at Kempen & Co; PT 16 euros

* Basic-Fit Cut to Neutral at Kempen & Co; PT 40 euros

* Getlink SE Cut to Neutral at Kempen & Co; PT 13.10 euros

* Ibstock Cut to Hold at Deutsche Bank; PT 168 pence

* Recordati Cut to Neutral at Intermonte; PT 51 euros

* United Utilities Cut to Hold at HSBC; PT 900 pence

>>> Initiation

* Allegro.eu Rated New Buy at HSBC; PT 102 zloty

* JDE PEET'S Rated New Equal-Weight at Morgan Stanley

* Unifiedpost Group Rated New Buy at Berenberg; PT 28 euros

>>> Call

* Unibail Update Weak as Expected, Focus on Capital Raise: MS

Steve Tomlin, who runs a Renault dealership in Britain, says sales of the Zoe small electric car have shot up this year, a turnaround he partly puts down to a fading of “range anxiety”, the fear of running out of power mid-journey.

The revamped model, which has accounted for a third of Tomlin’s sales for a couple of months this year, has a range of 400 km (249-mile). By contrast the previous model, which drew much lower sales, offered 300 km when fully charged.

“Range anxiety has gone away and once you explain how easy it is to live day to day with an electric vehicle, that has a big impact on sales,” said Tomlin, general manager of Martins Renault & Dacia in Reading, about 65 km west of London.

Renault told Reuters that UK sales of the Zoe had more than doubled this year, and that in France its zero-emission cars had outsold its diesel models this year through to the end of September - 19% versus 18% - in a significant milestone.

The company said it had trained 30,000 dealer staff across Europe on electric-vehicle technology.

“At the beginning, we were facing some psychological barrier linked to autonomy: oh la la, am I going to have a breakdown, I won’t have any more electricity,” said Denis le Vot, Renault’s head of sales. “We learned these lessons very well.”

Yet there’s a hard road ahead, and range and staff training is not enough. High battery costs and lack of manufacturing scale mean electric vehicles (EVs) are still more expensive than conventional vehicles - often in the region of 20-30% more.

This means Renault and other automakers rely on government subsidies to support demand, but such aid is patchy across Europe.

Battery costs are, however, expected to fall further, meaning some EVs should cost same as or less than combustion-engine models around the middle of this decade, according to industry experts.

“The first firms to achieve the ultimate goal - an affordable, unsubsidized electric vehicle - will gain a valuable competitive advantage,” Bain & Company said in an Oct. 29 report.

Until then, carmakers need to sustain electric sales and build up production muscle, but avoid overstretching their finances while they sell a lower-margin product.

Renault said its approach relied on making use of government subsidies and offering discounts on EVs, installing free charging stations for customers, along with the staff training.

In France, government subsidies, combined with a scrappage scheme and discounts from Renault, can shave up to 11,500 euros ($13,600) - more than a third - off the price of the Zoe, for example.

INTENSE COMPETITION

Aside from the financial pressures and the challenges of changing decades-old consumer behaviour, however, Renault also faces fierce competition at a time when all carmakers have to build up EV sales to meet strict EU emissions limits.

The Zoe may be accruing sales, but it was still a distant second to Tesla's Model 3 globally in the first half of this year, while the race is intensifying as carmakers from Volkswagen AG VOWG_p.DE to Toyota Motor Corp invest hundreds of billions of dollars to flood the market with new models.

Transport & Environment, a group campaigning for cleaner travel, estimates EVs will triple their market share in Europe this year, after making up 8% of European car sales in the first half of 2020.

“What has changed this year is not the subsidies but the fact that carmakers have invested in and brought forward adequately-priced vehicles with adequate performance,” said Julia Poliscanova, Transport & Environment’s senior director for vehicles.

SUBSIDIES DRIVE SALES

Yet, for the foreseeable future, subsidies are crucial.

“Whether it’s China or elsewhere, you still need a government mandate and support for EVs,” said Terrence Curtin, CEO of auto supplier TE Connectivity Ltd.

Norway has shown that huge subsidies for EVs, including tax breaks and low road tolls, have worked so well that a typical buyer of a small electric Nissan Leaf is “an average working man aged 30 to 50,” according to Frode Lehne, head of Mobile Skøyen AS, a Nissan Motor Co dealership in Oslo.

Ulf Tore Hekneby, a managing director at Harald A. Moller AS, which imports many Volkswagen group brands into Norway, said 91% of the Audis and 58% of the VW brand cars the company sold in Norway this year to September were electric.

Some European governments are upping their commitments.

Germany, for instance, doubled its electric car subsidies to 6,000 euros in the summer as part of a recovery plan for an auto industry hit hard by the pandemic, while France also raised its subsidy to 7,000 euros from 6,000.

But it’s harder in other European markets with less generous subsidies or where incomes are lower.

Sales in the Baltic states, for instance, have suffered because the countries either don’t offer subsidies, or those on offer are not enough to make EVs affordable, according to Hekneby of Harald A. Moller, whose parent group has dealerships there.

A total of 191 EVs were sold across the industry in Latvia, Lithuania and Estonia during the second quarter, versus 12,156 in Norway, even though the Baltic countries have a combined population slightly larger than Norway’s.

“Demand is close to zero,” Hekneby said.

Asian equities rebound as China data suggest recovery is gathering pace

Oil prices fell as new lockdowns across Europe stoked fears over demand, while stocks bounced after suffering their worst week since the height of the coronavirus-driven market turmoil in March.

Brent crude, the international benchmark, dropped as much as 4.6 per cent to $35.74 a barrel in Asia on Monday, hitting its lowest level since May as economists downgraded their growth forecasts in response to fresh lockdowns throughout the eurozone. West Texas Intermediate, the US marker, was down as much as 6 per cent to $33.64.

Economists now expect the bloc’s economy to shrink 2.3 per cent in the fourth quarter, while the Bank of England is expected to forecast later this week that the UK will at best barely grow in the final three months of 2020.

“The pressure that we are seeing on oil will be a real concern for Opec+, particularly with Brent now well below $40 a barrel,” said Warren Patterson, head of commodities strategy at ING.

“Another key uncertainty for the market is the US presidential election . . . and the consequences this could have on oil,” Mr Patterson added, pointing to the possibility of a Democratic administration under Joe Biden taking a less hawkish stance on Iran.

Stock markets across Asia received a boost from new signs that a recovery in China’s economy is gathering pace. The Caixin China General Manufacturing purchasing managers' index climbed to 53.6 in October — its highest level since January 2011. Any reading over 50 for the private survey means activity is expanding.

“The post-coronavirus manufacturing recovery continued to pick up speed,” said Wang Zhe, senior economist at Caixin Insight Group.

Hong Kong’s Hang Seng index rose 0.9 per cent, while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks gained 0.4 per cent. Japan’s Topix index added 1.9 per cent and South Korea’s tech-heavy Kospi climbed 1.1 per cent.

Futures for Wall Street’s S&P 500 index were 0.1 per cent higher while those for London’s FTSE 100 fell 0.5 per cent. Low trading volumes during Asian hours can increase volatility in US and European stock futures.

The S&P 500 fell 5.6 per cent last week on concerns over the spread of Covid-19 and a hotly contested US presidential election.

General Trend:

- Japanese equities trade broadly higher; Topix Securities, Iron/Steel, Real Estate and Transport-related indices are among the outperformers

- Japanese companies expected to report earnings include NTT Data and ORIX.

- Consumer-related firms rise in Australia; Financials trade mixed amid earnings from Westpac, Tuesday’s RBA decision is in focus; Energy sector tracks the decline in oil prices; CSR rises after earnings report and special dividend announcement

- Hang Seng Finance index rises on China bank earnings; Gaming firms trade generally higher after better than expected Oct Casino revenue data, MGM China lags

- IT firms lag in early Shanghai trading

- CICC rises over 30% in Shanghai debut

- AUD/USD holds above $0.70 ahead of Tuesday’s (Nov 3rd) RBA decision

- WTI Crude traded at the lowest level since May (below $34/bbl); UK announced its 2nd national lockdown, Saudi Aramco said to consider price cuts in Asia

- Bank of Korea Gov Lee announces BOK meeting Nov 4th to review impact of US elections

- Companies expected to report during the NY morning include Clorox, Estee Lauder, FirstEnergy, Henry Schein, Lumber Liquidators, Marathon Petroleum, Waste Management

***Headlines/Economic Data***

Australia/New Zealand

-ASX 200 opened +0.1%

- (AU) AUSTRALIA SEPT BUILDING APPROVALS M/M: 15.4% V 1.5%E

-WBC.AU Reports FY20 (A$) Cash Net 2.6B v 2.6Be v 6.8B y/y; adj Cash net 5.2B** v 7.9B y/y

- (NZ) New Zealand PM Ardern to announce her new Cabinet and new Deputy PM today

- (AU) Australia Oct Final PMI Manufacturing: 54.2 v 54.2 prior (5th consecutive month of expansion)

- CSR.AU Reports H1 (A$) adj Net 66.4M v 71.6M y/y, EBIT 86.6M v 113.1M y/y, Rev 1.08B v 1.15B y/y; declares special divided of A$0.04/shr

- (AU) Reserve Bank of Australia (RBA): Conducting study on wholesale digital currency; partners with Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys Software on Wholesale Central Bank Digital Currency Research Project

- (AU) Australia sells A$1.5B v A$1.5B indicated in 0.25% Nov 2025 bonds, avg yield 0.2745% v 0.3143% prior, bid to cover 6.3x v 6.2x prior

- (NZ) New Zealand PM Ardern Appoints Fin Min Grant Robinson as Deputy PM; To hold both positions and take on infrastructure role

- (AU) China Customs is delaying imports of certain lobster from Australia, Chinese officials have increased inspections related to Australian lobster - Australia press

Japan

-Nikkei 225 opened +0.6%

- 7201.JP Nissan to sell only electric or hybrid cars in China by 2025 - Nikkei

- (JP) Japan Oct Final PMI Manufacturing: 48.7 v 48.0 prelim (Confirms 18 months of contraction, highest reading since January)

- (JP) Japan Foreign Min Motegi: Confirms in talks with China on long term stays and restarting business travel - speaking in parliament

Korea

-Kospi opened +0.4%

- (KR) South Korea Oct PMI Manufacturing: 51.2 v 49.8 prior (1st expansion 10 months, highest reading since Sept 2018)

- (KR) South Korea PM Chung announced a new social distancing scheme based on five levels instead of three, new plan aims to improve anti-virus measures in a tailored fashion amid criticism the current system is too broad - Korean press

- (KR) South Korea COVID cases above 100 for 5th consecutive day Nov 1st due to cluster infections and fell back to double digits today

- (KR) Bank of Korea (BOK) Gov Lee: Will closely monitor markets ahead of US elections; To hold meeting on Nov 4th to review impact of US elections

China/Hong Kong

-Hang Seng opened +0.7%; Shanghai Composite opened +0.1%

- (CN) CHINA OCT MANUFACTURING PMI (GOVT OFFICIAL): 51.4 V 51.3E

- (CN) CHINA OCT CAIXIN PMI MANUFACTURING: 53.6 V 52.8E (6th consecutive month of expansion, highest since Jan 2011)

-(CN) PBoC Gov Yi Gang: Contactless Banking will raise challenges for Central Banks; Digital Yuan pilot program has been smooth

- (HK) Macau Oct Casino Rev (MOP): 7.3B v 2.2B prior; Y/Y: -72.5% v -90.0% prior

- (CN) China President Xi: China must set up a self reliant and safe industry chain - China press citing speech from late April

-HUAWEI.CN Planning to make a dedicated chip plant in Shanghai that would not use US technology, which would allow them to get around US sanctions – FT

- (CN) China Leading infectious disease specialist Zhong Nanshan: Even though China continued to battle sporadic outbreaks, existing controls meant there was unlikely to be a resurgence of widespread transmission “in the tens of thousands” – SCMP

- (CN) China PBoC Open Market Operation (OMO): Injects CNY50B in 7-day reverse repos v Injects CNY100B in 7-day reverse repos prior; Net inject CNY0B v Net inject CNY30B prior

- (CN) China Premier Li calls for high standards in formulating the 14th Five-Year Plan (2021-2025) for National Economic and Social Development to secure a good start in fully building a modern socialist country, more work should be done to make targeted major polices and ensure the implementation of key tasks underscored in the five-year plan

- (CN) China PBOC sets Yuan reference rate: 6.7050 v 6.7232 prior

-(HK) Hong Kong Monetary Authority (HKMA) Official Yu: Hong Kong Financial Market and dollar peg are operating effectively; Banking sector is resilient

North America

- BYTEDANCE.IPO US expected to "vigorously defend" Ticktok executive order - US financial press

- (US) President Trump planning to declare a victory ‘even if Electoral College outcome still hinges on large numbers of uncounted votes’ - Axios citing 3 sources with connections to Trump

Europe

- (UK) PM Johnson announced second national lockdown starting lasting to Dec 2nd to prevent a "medical and moral disaster" for the National Health Service

- AZN.UK UK health regulator has started an accelerated review (where clinical data can be seen in real time) of potential coronavirus vaccine

***Levels as of 1:15ET***

- Hang Seng +0.8%; Shanghai Composite -0.3%; Kospi +1.2%; Nikkei225 +1.4%; ASX 200 +0.4%

- Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax -0.4%; FTSE100 -0.6%

- EUR 1.1651-1.1630; JPY 104.77-104.54; AUD 0.7026-0.6996; NZD 0.6612-0.6591

- Commodity Futures: Gold +0.1% at $1,881/oz; Crude Oil -3.5% at $34.53/brl; Copper -0.4% at $3.04/lb

UK company’s pledge over ‘open RAN’ technology is a boost for smaller suppliers

Vodafone is to embrace technology from smaller suppliers as the UK group rips out and replaces Huawei-made 5G kit to comply with a government mandate on phasing out the Chinese company.

The group has pledged to use equipment made by smaller ‘open RAN’ vendors to provide 5G signals for a fifth of its UK network sites by 2027, in a move also aimed at breaking the stranglehold of large players including Nokia, Ericsson and ZTE.

Traditional mobile networks rely on radio access equipment — the kit that sits on masts and rooftops used to transmit mobile phone signals — that tightly bundles proprietary hardware with software provided by the biggest groups. However open RAN systems allow networks to chop and change those components and use kit from smaller companies.

Vodafone’s pledge to use emerging open RAN tech for at least 2,600 masts and rooftops is the largest confirmed promise made by a European carrier to embrace technology companies from outside the established supply chain.

“This commitment can get open RAN ready for prime time,” Scott Petty, chief technology officer at Vodafone UK, told the Financial Times.

He added that although open RAN was still a nascent technology more suited to rural coverage than dense urban areas, including such a large chunk of its network would create an opportunity for it to push into the mainstream. Spanish group Telefónica is also exploring greater use of open RAN systems for future upgrades.

Vodafone’s plan represents a boost for the UK government, after a task force launched to help strip Huawei equipment out of the country’s 5G networks by 2027 identified open RAN as a potential growth opportunity for the UK.

It could also support a government ambition to rebuild a foothold in the telecoms equipment market if growing open RAN use is used to justify research and development subsidies and companies in the field based themselves in Britain.

“The UK could regain a foothold which it hasn’t had since the break-up of Marconi,” said Mr Petty, referring to the collapsed British telco.

US companies Mavenir, Parallel Wireless and Altiostar have emerged as open RAN specialists in recent years, hoping to compete with larger companies, while hardware vendors like Samsung, NEC and Fujitsu are hoping to win market share as Huawei kit is removed.

The move to ban Huawei, the world’s biggest telecoms equipment maker, from 5G networks has meant networks have turned to Ericsson and Nokia to fill the void. BT has signed deals with both the Swedish and Finnish companies to replace Huawei kit over time, putting the cost of complying with the government phase out at £500m.

Ian Livingston, the former BT chief executive and trade minister heading up the government’s telecoms task force, told MPs last week that the push to foster open RAN would grant telecoms companies a greater choice of vendors in the wake of the Huawei ban and avoid a bottleneck in the supply chain.

Using open RAN is a more costly exercise which has led to some calls within the industry for more financial support. Mr Petty said this need not be in the form of direct subsidies to use the equipment but could be directed at speeding up the development of chips and software to compete with established companies such as Huawei.

- Includes stay at home order except for going to work, school or shopping; tells businesses to use remote working