PARTNER CONTENT: The move to 5G is accelerating globally as operators look to the technology to improve network efficiency as data usage soars, and search for new revenue streams to invigorate their tepid top-line growth.
Fifty mobile operators in 25 markets offered the next-generation mobile service at the end of 2019. Worldwide, 186 operators in 92 markets have conducted 5G trials, and 76 mobile players announced launch dates for 5G services.
GSMA Intelligence forecasts 5G connections will reach 1.8 billion worldwide by 2025, driven largely by high rates of adoption in China, Europe and the US. Analysts expect 45 per cent of all mobile traffic to run on 5G networks by 2025, when two-thirds of the world’s population will have coverage.
Rapidly falling smartphone prices will spur uptake as deployments widen. While consumers currently are paying a premium for the first wave of 5G handsets, Canalys expects prices to fall faster than with 4G devices because vendors are more connected to the supply chain and committed to lowering prices to appeal to a wider audience. Prices of some 5G models in China have already dropped to CNY2,000 ($288).
The research company predicts 5G, together with new features such as foldable screens and faster chipsets, will fuel a rebound in the smartphone market in 2020, kicking off a three-year era of growth.
As for tariffs, operators in six of the ten largest 5G markets are not charging a premium on 5G services and fewer than half offer unlimited data plans. In South Korea, LG Uplus in the third quarter reported a second consecutive quarter of gains in mobile service revenue and ARPU during Q3, which it credited to the launch of 5G six months earlier.
Enhanced mobile broadband (eMBB) is the primary use-case for early deployments. Many analysts see video content as a clear 5G sweet spot, particularly as more 4K and 8K content is produced and distributed, as well as mobile gaming.
China takes lead
At the end of October 2019, China’s three major mobile operators officially launched 5G services in parts of 50 cities, around five months after the government issued spectrum licences. As of mid-November, they deployed 113,000 5G base stations.
Market leader China Mobile planned to install 50,000 sites by end-December 2019 in 50 cities and expand coverage to 300 major cities by the end of 2020. The operator, which already has more 5G subscribers than all three South Korean operators combined, aims to offer network slicing services by the middle of 2021 when its standalone (SA) 5G network reaches commercial scale.
The world’s largest mobile operator set a target of signing up 70 million 5G users by the end of 2020, with a planned investment of CNY20 billion ($2.85 billion).
China Unicom and China Telecom each targeted about 40,000 base stations by end-2019.
The two operators in September 2019 agreed to jointly build and maintain 5G radio access networks (RANs) across the country to accelerate deployment and reduce infrastructure costs. Each company will be responsible for operating its own core networks, but will share spectrum resources and a single RAN. Under the agreement, each will build out the wireless network in specific regions of China.
GSMA Intelligence predicts by 2025 China will be home to roughly 44 per cent of global 5G subscribers. That percentage translates into more than 787 million subs, which will represent 47 per cent of the country’s mobile customer base.
Tim Hatt, head of research at GSMA Intelligence, expects the large base to act “as an increasing force of gravity for a domestic supporting ecosystem of handset manufacturers, chip makers, network equipment suppliers and content producers that reduces reliance on foreign companies.”
Chinese operators see the move to 5G as an opportunity to improve cost efficiency as data traffic continues to soar.
Operators in South Korea simultaneously launched 5G service in early April 2019 and ended September with a combined total of nearly 3.5 million 5G subscribers.
The country’s Ministry of Science and ICT in December detailed plans to nearly double the allocation of 5G spectrum for mobile operators by end-2026, making an additional 2640MHz of airwaves available.
South Korea was one of the first to auction 5G spectrum (in June 2018) and has ambitions to lead the world in spectrum availability, with a target of 5320MHz.
Outside of Asia, 5G services are now available in nine countries in Europe, with more than 40 operators detailing plans for launches. Following a number of rollouts in the third quarter of 2019, all the operators in the UK now offer 5G services.
After T-Mobile US switched on 5G service in early December, all major US operators have deployed some form of the technology in select locations. GSMA Intelligence expects North America to have 345 million 5G subs by 2025.
A survey by GSMA Intelligence found that new revenue generation is the primary goal of network transformation initiatives for two-thirds of operators, helping justify additional network investment.
5G represents the biggest network transformation opportunity (and challenge) for operators in the last decade. Most operators plan to start 5G deployment in non-standalone (NSA) mode. However, more than 70 per cent plan SA launches in three years.
The vast majority of operators expect network investment spend to remain the same or grow over the next 12 months. Some 40 per cent expect spend to be up to 10 per cent higher.
Enterprise revenue is forecast to become increasingly important for operators. While NSA 5G can enable enhanced mobile broadband (eMBB), enterprises require greater network flexibility. This provides impetus for operators to develop 5G SA networks as they look to massive machine-type communications (mMTC) and ultra-reliable low-latency communications (URLLC) services.
This shift is essential as consumer revenue growth from large data bundle sales cannot be sustained in the long term. ARPU levels will eventually decline as data tariffs fall. For example, GSMA Intelligence forecasts annual consumer revenue in China to decrease by more than $900 million between 2023 and 2025.
Frost and Sullivan believes 5G networks will allow operators to offer new value-added services, which it predicts will become a bigger contributor to the sector’s revenues than basic connectivity services, driving the 5G market in the Asia-Pacific region to $124.8 billion by 2025.
The company said in a research note many mobile operators are aggressively entering the 5G space and to enjoy the full potential of the technology it suggested they focus on industry partnerships and collaborations, which will reduce overall costs and hasten the deployment of the new use-cases enabled by the introduction of 5G.
While the benefits of 5G are many and far-reaching, operators face a number of challenges, particularly in terms of network implementation. In addition to the significant investment required, key issues to overcome include increased network complexity, providing a diverse range of services, network optimisation considerations as well as a number of spectrum limitations.
As operators look to launch 5G, they need to be prepared to introduce a wide variety of services for both the consumer and enterprise segments, which complicates network deployments as each use-case has different network requirements.
Once 5G use-cases are selected, operators need to determine the specific network requirements for planning and deploying the network. Different services deliver different experiences, which need new indicators and new ways of evaluation.
The use of new technologies such as Massive MIMO and NSA architecture, where 4G and 5G are closely coupled, will increase the complexity of network planning, construction and optimisation by a hundred-times, which makes AI technology and special services necessary.
Another major issue is mid- and high-band spectrum (id est C-Band and mmWave) have more limited coverage and poorer indoor penetration compared with most LTE bands, which means more base stations are often needed. Operators are turning to small cells to provide the dense coverage required for high-capacity networks, particularly in densely populated urban areas.
Higher frequency bands require more accurate planning of 5G sites to keep costs down, which requires a highly-precise propagation model and 3D simulation technology.
The deployment of 5G adds yet another network, making maintenance and co-existence with 2G, 3G and 4G infrastructure more difficult. In this case, operations are becoming more complex and costlier. Automated and intelligent operations will be a must. The reactive operational model will evolve to a proactive and autonomous model, with machine learning and prediction capabilities.
Operators are forecast to invest up to $1 trillion in 5G networks between 2018 and 2025, so expectations are high, with many in the industry believing the technology will transform the sector by not only improving the end-user experience, but creating new business models and services.
Rising competition in most markets continues to erode margins, forcing operators to find additional revenue streams. More and more operators are counting on 5G to spearhead their transformation and drive bottom-line growth.