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Should Mobile Operators Push Back 5G Plans to 2021?

by Philip Kendall | Apr 17, 2020

COVID-19 is having a significant impact on mobile operator planning in relation to 5G services in 2020. Its rapid spread continues to disrupt economies around the world, with the magnitude of the effects of this disruption likely to grow while there are no signs of any short-term solution to fixing the problem. Strategy Analytics forecasts smartphone sales will fall 21% this year (though recover well in 2021), with an extension in device lifecycles impacting upgrade volumes for 5G. However, 2020 will not be a lost year for 5G and there are many positive signs both in terms of 5G growth potential and its ability to support initiatives tackling the coronavirus.

5G Networks Continue to Launch and Grow

5G network launches have continued in 2020, with Strategy Analytics counting over 15 commercial launches since the start of the year. Since late February, when the global scale of COVID-19 was becoming clear to all, 5G networks have been launched in Thailand with AIS, Hong Kong with HKT and China Mobile HK, and Japan with NTT DoCoMo, KDDI, and Softbank, plus new operator Rakuten Mobile launching new plans in advance of a summer launch.

At the same time, operators continue to roll out their 5G networks. In China, the government is looking to infrastructure projects to offset the economic impact of COVID-19, with 5G one of the key infrastructures – China Mobile plans to have 300,000 5G base stations in use by the end of 2020, while China Telecom and China Unicom have brought forward the target for deploying 250,000 base stations in their joint 5G network to September 2020. 5G investment plans also remain strong in the US, with Verizon increasing its CAPEX plans for 2020 and Fitch Ratings noted that despite the challenging economic environment “adequate cash flow and liquidity flexibility should support a continuation of planned 5G capex and broader introduction of 5G service later in the year”. While operators in countries under national lockdowns are prioritizing their engineering operations on network maintenance over network upgrades, 5G rollout is still happening and operators will need to be ready to support the upturn in 5G device sales in H2 2020.

Increased infrastructure spend in fixed broadband networks, particularly to boost backhaul and interconnect capacity, to cope with the >40% increase in fixed Internet traffic many operators are experiencing, should also benefit 5G deployment plans. Backhaul will account for almost one quarter of 5G rollout costs, and network investment now to support home working, studying and isolation will be leveraged to ease or speed 5G deployments.

The 5G Device Ecosystem Continues to Expand

In the absence of MWC Barcelona, smartphone launches have continued in the first half of 2020, perhaps most encouragingly including a good range of affordable models targeted at the Chinese market (where there is still pressure to deliver sub-$200 5G smartphones by the end of 2020) and also internationally. These include Huawei’s Honor 30S at $340, Xiaomi’s Mi 10 Lite at $380, Vivo’s S6 5G at $380, TCL’s 10 5G at $490, and Samsung most recently unveiling two new mid-range 5G models, the Galaxy A51 5G at $500 and Galaxy 751 5G at $600. More affordable 5G smartphones will be key to medium term service adoption, though operators will also need to consider network plans in anticipation of demand created by the expected 5G iPhone and Samsung Galaxy Note 20 launches in H2 2020.

5G Has Made a Positive Contribution to the COVID-19 Response Effort

It is almost impossible to overstate the degree of operational change that COVID-19 has caused in healthcare and public services, and the degree of behavioral change witnessed in societies around the world. Hospitals and healthcare providers have had to respond with new working practices and new facilities in hours and days, rather than weeks and months, while businesses, employees, educators and students have created unprecedented demand for broadband at home and have embraced online tools for collaboration, communication, education, and entertainment.

As new hospitals have been constructed in China, the operators have rushed to deliver fiber and 5G connectivity, with 5G having the advantage of more rapid deployment possibilities, for example with China Mobile, China Telecom, and China Unicom all supporting the Vulcan Mountain Hospital in Wuhan. Beyond basic ‘emergency’ connectivity, 5G healthcare use cases have included deployments of CloudMind’s 5G Cloud Robots to reduce contact risk, Neolix’s unmanned vehicles for body temperature monitoring, spray disinfection and medical supplies distribution, and the use of 5G-enabled cloud collaboration tools for CT scan and x-ray screening and online consultations via HD video.

As work and education have moved online during lockdowns, 5G has found a role in some communities in enhancing broadband performance. This can arguably be seen most in the area of education, where school closures have highlighted the importance of good quality home broadband, particularly in rural and disadvantaged communities. Again in China, the Ministry of Industry and Information Technology has requested operators extend 4G and 5G coverage to support online education. In the US, Ericsson worked with Vermont Telephone to deploy 4G/5G coverage and deliver modems and routers to homes to give students free high-speed wireless internet access, using 4G CPE today but on 5G devices later this year. Inseego has noted increased demand for its flagship 4G and 5G MiFi mobile hotspots, while operators offering discounted 5G FWA are seeing healthy demand: Rain (South Africa) added a lower-tier unlimited 5G home service at ZAR699 (USD38) per month and has experienced a doubling of weekly demand, while lower-priced 5G plans at Zain Saudi Arabia have resulted in a 25% increase in demand.

Can 5G Help the Economic Recovery?

We have already noted that the Chinese government expects its operators to accelerate their 5G deployment plans as part of the country’s focus on generating economic growth through infrastructure projects. China’s MIIT has issued a policy paper to encourage local governments to open public buildings and utilities for operators to build 5G cell sites. The government will also coordinate with power grid companies to lower electricity cost of 5G networks. Hungary’s government is also keen to see early 5G deployments following the completion of spectrum auctions which were brought forward to March, encouraging operators to deploy in locations of social importance such as hospitals, universities or major transport routes to help manage the health crisis, while also recognizing the importance of 5G in supporting a post-crisis economic recovery.

On the 1st year anniversary of 5G services in South Korea, a strategic committee of 12 government ministries outlined the role they saw for 5G in leading the recovery after COVID-19. In part this involves plans to boost the participation of Korean companies in the global 5G market, but also looks for 5G coverage enhancements from Korea’s operators who have increased their H1 2020 investment plans from KRW2.7 trillion (US$2.3 billion) to KRW4 trillion ($3.3 billion), with a special focus on indoor coverage in over 2,000 locations. It recognizes the importance of 5G in stimulating the economy through the creation of new markets and the transformation of existing industries, with a 2020 focus on developments in smart factories, smart cities, digital healthcare, autonomous vehicles and 5G V2X, and drones.

As Strategy Analytics noted in our report “5G and its Impact on Enterprise Digital Transformation”, 5G is a “core component of what it will take for business to create IT environments that are virtualized, agile, software-defined and exceptionally responsive to user experiences.” COVID-19 is not an ‘opportunity’ to be exploited, but it is causing many businesses to accelerate their plans for digital transformation and 5G has an important role to play in creating positive outcomes from current disruptions.

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