Capitalizing on the value of 5G

Telcos are really excited about 5G, if levels of investments can be taken as a reliable gauge. To build a pan-India 5G network, Jio has committed a total investment of ₹1.12 lakh crore, and Bharti Airtel, having put in ₹27,000 crore in 2023, expects an additional ₹75,000 crore CapEx in the next three years. And India is eyeing global leadership in 6G too.

Undoubtedly, 5G is exhilarating. 5G’s faster speeds, lower latency, and higher bandwidth have the potential not only to delight customers with seamless video streaming and lag-free video games but also to enable next-generation tools and platforms that draw on AI, IoT, edge computing, and automation, and can transform how we live and work.

GSMA has pegged the expected investment between 2022 and 2025 in 5G networks globally at USD 600 billion-plus. Despite these substantial infrastructure investments, the adoption and monetization of 5G are still in their infancy. Enthusiasm alone will not allow telcos to recoup their investments, let alone thrive in a rapidly evolving landscape. Capturing value from a new phase of innovation across industries is required. The service providers will need to reposition themselves as 5G business builders that serve as critical partners to organizations seeking next-generation, 5G-enabled use cases, such as automated manufacturing and autonomous vehicles.

As 5G technology transforms every industry, telcos have a choice – they can remain network providers, or they can reinvent themselves as outcome providers.

McKinsey, in a recent paper, has suggested that to make most of the 5G opportunity, telcos work their way across three distinct horizons of 5G business building – core connectivity, which presents an opportunity to capture between USD 10 billion and USD 20 billion by 2028; premium connectivity, with an estimated value pool as large as USD 30 billion to USD 50 billion by 2028; and platforms and solutions, where the value potential is several times higher.

As operators build businesses in each horizon, they will encounter new challenges, customers, and competitors. To adapt, they will need to shift their mindsets and business approaches. Operators that strategically evolve from core connectivity to platforms and solutions, building new skills and capabilities along the way, will position themselves to recoup their substantial investments in 5G and maximize their share of a value pool. The sooner telcos embark on the 5G monetization journey, the sooner they can begin to capitalize on this new phase of innovation.