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5G Three Years On: Learning from Asian Successes

by Philip Kendall | 6月 13, 2022

The 5G market is currently enjoying an impressive growth phase, helping to improve the outlook for a range of communications services providers (CSPs) looking for value growth for their businesses.  In the device market, over one billion 5G phones have been sold globally by the end of March 2022, with the technology accounting for 42% of phone sales in Q1. In the same month, there were approximately 720 million active 5G users around the world, over 8% of all subscriptions. Mobile service revenue is currently increasing 3-4% per annum (levels not seen since 2012) and 5G is one, but not the only, factor contributing to this improved performance.

Asia has been an influential region in driving 5G volumes and developments. It is now roughly three years since South Korea launched commercial 5G services (April 2019) and China issued 5G licences (June 2019) and while countries in other regions launched services on a similar timescale it is arguably these two markets which have gained the most from 5G launches and provided the most insight for operators in other markets.

Mobile service revenue has made a strong recovery in both markets in since 5G launches. From falling 4-5% per annum in mid-2019, they are now growing 3-4% per annum. High growth in data traffic volumes had slowed significantly by 2019 in both markets, with 4G no longer able to provide growth in relatively saturated and highly competitive market environments. 5G delivered a significant boost to revenue performance. Higher-value services are the cornerstone of 5G propositions in these markets and the high level of adoption of 5G is helping to amplify this effect: at the end of March 2022, 5G accounted for 31% of all connections in South Korea (over 40% of smartphones) and for 25% of connections in China. There have been a number of elements behind this success: strong 5G network development, affordable 5G smartphones, compelling 5G service development across B2C and B2B segments, and service pricing to stimulate usage and content consumption.

Mobile Service Revenue Growth in China and South Korea, 2017-2022

Rapid 5G network coverage has been a critical element in creating a positive user experience for 5G services and supporting adoption growth. China’s operators have constructed nearly 1.6 million base stations to deliver over 90% population coverage across the nation, mainly in the 2.6 GHz and 3.5 GHz bands (and 200,000 at 700 MHz), while in South Korea the operators had passed 90% population coverage by early 2021. The large-scale deployment of massive MIMO effectively improves the network performance and user experience in the two countries. South Korea consistently tops global crowdsourced rankings for 5G network performance across a range of speed and availability metrics, as seen in Opensignal’s March 2022 global benchmarks. China also reports that the 5G data rate is significantly higher than the 4G rate. According to CAICT, the average downlink and uplink data rates of 5G networks across China were 334.98 Mbps and 70.21 Mbps in Q1 2022, respectively, while the average downlink and uplink data rates of 4G networks were 39.02 Mbps and 21.63 Mbps. 

One of the most significant changes with 5G compared to previous network generations has been the very early involvement of China, bringing economies of scale to the device market that took years to be realised with 4G. Almost 80% of phones sold in China in 2021 were 5G-enabled (one of the highest rates globally) with a growing range of sub-$200 options available. The retail price of some models has even dropped to RMB 1,000, i.e., approximately USD 150. Of the top ten 5G vendors by volume in 2021, eight were Chinese. For South Korea, Chinese vendors barely factor but Samsung’s near full control of the market has allowed it to shape technology demand with support from the operators in terms of subsidies and promotions to push migration to 5G.

High quality networks and affordable devices are critical to the success of any technology, but perhaps the most significant factor behind early momentum has been giving consumers and businesses a reason to use 5G. In both of these countries, B2C content and enterprise applications have helped to showcase 5G’s capabilities and to drive demand for service adoption.

  • VR and AR content has been a key element in South Korea’s 5G content strategy, with consumers responding well to strong libraries of content across sports (in particular, baseball and golf) and entertainment. SK Telecom, KT and LG Uplus have all worked hard and made significant investments to produce their own VR and AR content to fill a gap left by the media industry and keep content libraries fresh. China’s operators have often bought XR content to specific locations and events as part of their 5G content strategy, enhancing visitor experiences at theme parks and museums.
  • The VR and AR focus has evolved into metaverse platforms in 2021 and 2022, with all three operators active in this space. SKT’s ‘ifland’ metaverse platform had 1.35 monthly active (and 5.5 million cumulative) users by March 2022 with users spending over an hour per visit in the virtual world, while LG Uplus’s recent metaverse activity has seen it launch a virtual zoo for children and virtual office applications for the business market.
  • Cloud gaming and UHD video content have also been important consumer use cases in both markets, utilizing the speed and latency of 5G. Video and gaming are key elements within China Mobile’s Migu digital content unit, where revenue increased 47% in 2021 supported by strong 5G growth.
  • China is leading the world in 5G private network deployments, the majority utilizing network slices on 5G standalone, rather than dedicated on-premises capacity. At the start of 2022 there were over 4,200 5G private networks in China, with broadly similar volumes at each operator. These cover a broad range of industrial use cases with larger volumes in manufacturing, mining, ports, and healthcare (see image below). South Korea is arguably not far behind, with smart factory solutions in particular seeing healthy growth since 2020. Alongside broad ecosystem collaboration to develop the applications and services, government support for industry has also been an important factor in market success. For example, South Korea’s Digital New Deal identified 5G and AI as key building blocks in the creation of a new ecosystem to transform industries and government. This initiative has supported a strong boost to the smart factory sector in 2020/21 in South Korea and is having wider benefits across industry and society in supporting the production of immersive cultural and educational content, e-learning and virtual training programs, smart retail and smart hospitals, and the commercialization of self-driving vehicles and self-navigating vessels. 5G has a critical enabling role to play there.

China Mobile & China Telecom 5G Private Network Development and Strategy

From a pricing perspective, one feature in both markets has been the bundling of content subscriptions into 5G plans in order to encourage experimentation and establish patterns of use. China’s operators have aggressively priced 5G plans, to the point where many users with 4G devices have benefitted from switching to 5G tariff plans, while South Korea used 5G as an opportunity to re-introduce unlimited data plans as the preferred pricing model. ARPU uplift is still available here by bundling more content into higher-value premium plan options. Strategy Analytics estimates 5G ARPU was US$36.6 in Q1 2022 in South Korea, versus US$22.3 on 4G (and US$25.5 for the market overall). Similar ratios can be seen in China, where for 2021, 5G ARPU was 1.7x total blended ARPU at China Mobile and 1.5x at China Telecom.

The excellent network experience, affordable devices, and rich contents together stimulate the data usage of 5G customers in China and South Korea. South Korea’s MSIT reported that the average data usage per 5G customer (26.499 GB) was almost 2.2 times the blended average data usage per customer (12.132 GB) in April 2022.  China Telecom also reported that, in 2021, its customers consumed 24.1 GB per month, which was much higher than the average data consumption of Chinese mobile subscribers in the same period (13.36 GB).

In both markets, 5G is also making a positive contribution to the economy and society. In December 2020, China Academy of Information and Communications Technology estimated that 5G would drive approximately USD200 billion of economic output and USD50 billion of economic value-add in 2021. The extensive 5G coverage and improved user experience boost the growth of the mobile Internet ecosystem. For example, the penetration of mobile video applications had been more than 90% by the end of 2021, according to China Internet Network Information Center. The average mobile data usage was over 15 GB per month by April 2022, according to MIIT.

In South Korea, the championing of ‘untact’ services that remove the human interaction layer (a trend accelerated by the pandemic), is also changing social behavior, improving access to services for many, boosting productivity, and providing an engine for economic growth, with high-quality ubiquitous 5G connectivity key to these developments. Non-face-to-face communications are central to many businesses in South Korea (e.g. 12 out of 15 unicorn companies primarily use untact methods) with consumers happy to continue untact interaction post-pandemic. 5G development also creates the opportunity for Korean operators to export their content products and services. Since 2020, LG Uplus has exported its XR contents to China Telecom, KDDI, Hong Kong Telecom, Chunghwa Telecom, AIS, Celcom, etc.  The contents included K-pop performances, games, cartoons, live sports, movies, and travel, with 3D and 4K UHD resolution. LG Uplus’ cumulative 5G content exports were more than US$23 million by October 2021, according to a media report.

Three years after 5G services commercially launched in Asia, China and South Korea do stand out as countries offering numerous lessons on how to deliver value-generating new technologies into a market. Successes have been built on:

  • Rapid 5G network deployment delivering nationwide user experience gains
  • Strong service innovation to develop compelling use cases for consumers and businesses
  • Affordable 5G devices bringing user experience gains further into the mass market
  • Consumer 5G pricing focused on innovative service plans and content bundling to stimulate use of 5G-enabled services
  • Collaborating with ecosystem partners where industry-specific expertise is required or where content market are not sufficiently mature.
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