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UPDATE 1-BT says cap on Huawei in UK networks will cost it 500 mln stg

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LONDON, Jan 30 (Reuters) - BT said Britain's decision to limit Huawei's role in building 5G and fiber networks would increase the cost of its gigabit-communications plan by about 500 million pounds ($657 million) over five years.

Philip Jansen, chief executive of Britain's biggest broadband and mobile provider, said he welcomed the clarity around the use of vendors such as Huawei, a long-standing BT partner.

"(We) agree that the priority should be the security of the UK's communications infrastructure," he said in a third-quarter trading update on Thursday.

"We are in the process of reviewing the guidance in detail to determine the full impact on our plans and at this time estimate an impact of around 500 million pounds over the next 5 years."

BT reported a worse-than-expected 3% drop in third-quarter revenue to 5.78 billion pounds ($7.6 billion), saying it was impacted by regulation, competition and legacy product declines.

Core earnings were also below market forecasts, down 4% to 1.98 billion pounds, which the company blamed on the fall in revenue, higher spectrum fees, investment in customer experience and higher operating costs in its networks arm Openreach.

Analysts were expecting the company to report total group revenue of 5.83 billion pounds and core earnings of 1.995 billion pounds, according to a company-supplied consensus.

BT said it remained on track for the year, although its free cash flow would be in the lower half of its 1.9 billion to 2.1 billion guidance range. ($1 = 0.7608 pounds) (Reporting by Paul Sandle; editing by James Davey)

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