‘4G changed lifestyles but 5G will change society’. The widely-used telecoms industry maxim offers context and optimism for the worldwide network upgrade. While not all the telcos globally are embracing this wave of technology change, the top officials of many countries seem to believe that those implementing 5G hardware now will be able to steal a march on the laggards.
At the 20th annual UBS Greater China Conference in Shanghai in January, Daisy Zhu, Head of Marketing Operations, Huawei Wireless Network observed, “China was one of the second batch of countries in 4G’s development, but for 5G, China is among the pioneers.” What sets China apart from fellow pioneers though, is scale; by the turn of the decade, 14,000 base stations had been installed in Shanghai alone
The potential of 5G is not in question; across the world, it’s being hailed as a technological evolution that will unleash a business model revolution. The bedrock for the Fourth Industrial Revolution, 5G is expected to underpin a massive automation cycle, moving the world from connected people to connected things. But whilst the fanfare is certainly rousing and loud and many countries have started the process of rolling out 5G, we are still some way from a world where 5G is the global norm.
UBS estimates that by 2024, 5G networks will cover 50 to 60 percent of the global population, with 18 percent of the global mobile base signed up to the new wireless technology. This implies a slower take-up rate of 5G versus 4G, which reached 30 percent penetration after a five-year launch phase. However, the future success of 5G should not be benchmarked on penetration numbers alone, given the other revenues streams that it generates, such as fixed wireless access (FWA), enterprise, and Internet of Things (IoT).
China was one of the second batch of countries in 4G’s development, but for 5G, China is among the pioneers
While excitement among handset and equipment makers are high, many telecom operators are taking a more measured approach to 5G as they
would like to see a better path towards monetization given the disappointing returns made during 4G.
“4G has delivered limited monetization and many telcos have yet to turn a profit against that investment,” says Navin Killa, Head of Asia Pacific TMT research at UBS. “$350 billion in capital expenditure will be needed over the next five years in order to achieve 60 percent global population coverage. Spending on towers and spectrum bandwidth could add a further $200 billion to the capex outlay.”
Asia - the 5G Vanguard
Today, Asia leads the way in terms of rollout. South Korea’s at the fore, with 90 percent nationwide 5G coverage and the number of subscribers expected to reach 7 million, or 14 percent of the population, by the end of 2020.
With network trials running in up to 50 cities, China’s 5G coverage currently probably sits at less than 5 percent and will increase to more than 10 percent of the population by 2020 as the number of 5G base stations installed is set to quintuple from the current 130 thousand. Add increasing availability and affordability of 5G-enabled handsets, and subscriber numbers could soar in tandem.
Daisy Zhu told UBS’s Greater China Conference that Huawei is set to release a 5G phone priced at$300 later this year.
“Once this more affordable phone becomes popular, we believe there can be 200 million 5Gsubscribers in China by 2020,” predicts Zhu. “Apple is expected to release their 5G iPhones in thesecond half of this year. This will also significantly increase the total number of global 5G users.
The “Killer App”
The advent of 5G opens up new revenue opportunities and may spur companies to change their business models and embrace partnerships. Telcos will have to move beyond providing pure and undifferentiated internet access; automakers will need to evolve from selling cars to lifetime customermanagement; hospitals will have to start providing “anytime-anywhere” comprehensive health management.
At the consumer level, one key question needs answering: what will be the “killer app” that helps 5G uptake take off?
“We believe VR (virtual reality) will develop very fast in the 5G era,” says Huawei’s Daisy Zhu. “The number of VR users in South Korea has reached a third of their 5G subscribers. This hasn’t happened in China yet but I think VR will also develop fast in our country.”
The total number of VR goggles and glasses sold worldwide was 6.5 million in 2019. As the design of VR headware rapidly becomes smaller and sleeker, Zhu estimates unit sales will reach 15 million or more in 2020.
“VR has a wide bandwidth and it uses a large volume of data. It also has a very high ARPU (average revenue per user) value so it’s very likely that VR will become the “killer application” of the 5G era.”
The spotlight on VR shines even brighter when you add cloud gaming to the mix, as 5G enables CGrendering of games on mobile phones, and eliminates latency issues. David Jiang, Co-Founder of TPCast, told the Greater China Conference that VR would be a literal ‘game changer’, “Nowadays whenwe play games with 4G, we usually play games like Honor of Kings on mobile phones. In the 5G era,people will simply wear VR glasses and enjoy games with a more vivid experience.”
We believe there can be 200 million 5G subscribers in China by 2020
Jiang predicts VR could play a pivotal role in justifying the industry maxim’s claim that 5G will ‘change society’, thanks to possibilities in “different areas such as health care, education and defense”.
Huawei’s Zhu, however, glances back to look forward, “How did 4G change our lives? Looking at popular mobile apps such as TikTok, WeChat, Didi Taxi and mobile payments, this was all made possible by the development of the 4G network, and they have changed our way of life. And while we continue to imagine and envision the ways in which 5G might ‘change society’, there is little doubt that it will.”