Mobile operators globally have advanced 5G services significantly in 2021, with strong and significant growth that has outperformed the early days of 4G. After three years of commercial services, the number of 5G subscriptions globally increased from 510 million at the end of June 2021 to 640 million in September, a level that it took 4G over five years to reach. While 2020 and early 2021 saw China, South Korea and the USA dominate global 5G subscription growth, the market has expanded significantly in 2021 and a growing number of operators are seeing 5G making a meaningful contribution to subscription and value growth.
We find interesting results when we compare the performance of 5G operators who’s network investment has delivered top rankings in Opensignal’s 5G Global Mobile Network Experience Awards or in their country 5G experience market insights against other ‘follower’ operators in the same markets. Opensignal quantifies network experience on a number of parameters, and we have created a basket of Leader operators in terms of 5G coverage in their country (based on winning on Opensignal’s Reach and Availability awards) and on 5G speeds (based on Downlink and Uplink performance) and Follower operators covering the remaining operators in those countries. When mapped against Strategy Analytics’ Wireless Operator Performance Database, we find that operators leading on 5G network KPIs in their markets are currently outperforming the competition.
5G coverage leaders saw mobile service revenue increase 4.8% between Q2 2020 and Q2 2021 versus a 3.9% increase at 5G coverage followers in the same markets. As seen in the chart below, 5G leaders on coverage enjoyed a 0.9 percentage point revenue growth lead, a 0.6pp ARPU growth lead, and saw their EBITDA margin improve by 1.9pp versus 5G followers in those markets. And 5G leaders on network speeds enjoyed a 2.5 percentage point revenue growth lead, a 0.7pp ARPU growth lead, and saw their EBITDA margin improve by 2.0pp versus 5G followers in those markets.
It is worth drilling down into individual operator results to assess 5G impact to date.
In Asia-Pacific, South Korea and China remain the stand-out 5G markets. For South Korea’s operators, ARPUs had fallen consistently for many years, recording annual declines every quarter between Q4 2015 and Q1 2021, though have increased for the last two quarters as 5G adoption continues. 5G’s share of subscriptions has increased from 17% of subscriptions at the start of 2021 to 26% by the end of September. Strategy Analytics estimates a Q3 5G ARPU of USD39.2, helping to lift the blended ARPU 0.6% year-on-year to USD26.5. For LG Uplus the improvement has been more significant, with its strong network performance and focus on breadth of AR/VR services helping its blended ARPU to return to growth earlier than the market in Q4 2020.
In China, 5G package subscriptions totalled 624 million in September 2021 (38% of all mobile subscriptions), with 5G devices in use reaching 445 million. In their H1 results, all operators reported healthy mobile service revenue growth after a 2019 hit by competition and a 2020 hit by Covid-19. Both China Mobile and China Telecom report a c. 10% uplift in ARPU as users upgrade from 4G to 5G, with China Mobile also seeing a 29% increase in average usage after upgrading (to 20.7 GB/month). China Telecom and China Unicom sustained ARPU growth into Q3 and overall mobile data traffic continuing to enjoy 5G-fuelled growth, up 25% per data user per month in Q3. In Hong Kong, the regulator OFCA reported 1.75 million 5G subscriptions in July 2021 (10% of active subscriptions). Hutchison Telecom HK was the first operator to deploy 1,000 5G base stations in the territory and has around 20% of its postpaid base on 5G, a major contributor to its 7% growth in local postpaid ARPU in H1.
In the Middle East, Gulf States have been among the most aggressive in rolling out 5G services. It is a region that has had more success than most in 5G FWA adoption (a market segment even more dependent on excellent network performance) with, for example, Zain’s operations in Saudi Arabia and Kuwait connecting over 450,000 5G FWA customers, delivering an ARPU of USD70 (versus a mobile ARPU of USD26 in Kuwait and USD20 in Saudi Arabia). 5G already accounts for 40% of traffic for Zain in Kuwait.
In Western markets, 5G leaders are also gaining share versus their major rivals, though market maturity and competition sometimes dampen the results. In the US, T-Mobile’s 5G network leadership delivered 5.5% retail service revenue growth versus 3.7% at AT&T and 3.2% at Verizon. In Finland, a market where speed-based unlimited data plans drive investment in network quality, DNA’s strong 5G network position is helping to grow its value share, with Q3 service revenue up 3.5% compared with 2.3% for the competition. DNA’s competitors in Finland are also unlocking value through 5G, with Elisa reporting an increase of monthly billing for new 5G customers of more than EUR3 (postpaid ARPUs are EUR20.1). Finland is a little ahead of many West European markets in this area, with the operators reporting 60-70% of phone sales in 2021 already on 5G. And in Switzerland, Sunrise covers around 900 cities and towns with Highspeed 5G (C-Band), with 50% of all its sites supporting this (compared to 31% of Swisscom’s outdoor sites). 10% of Sunrise’s mobile traffic was on 5G in September and we estimate it has grown its market share over the last year (excluding the impact of the UPC merger) by 1.1 percentage points in postpaid subscriptions and 1.5pp in postpaid revenue.
These are encouraging results for operators evaluating 5G launch and expansion strategies. With high levels of mobile penetration resulting in competitors fighting over limited subscription growth, it is welcoming to see that 5G service upgrades are helping to unlock additional end-user spend on better service experiences. And it is promising to note that those operators who have committed most to 5G network quality have seen the greatest gains.