Momentum continues to build for 5G globally, with 800 million active 5G users at the end of June 2022, estimated to have increased to 1,080 million by the end of the year, equivalent to over 12% of all mobile connections. 5G networks reached 27% of the world’s population by the end of 2021 and Strategy Analytics forecasts the rate of coverage will increase from 650 million inhabitants added in 2021 to 760 million added in 2022. Over one billion 5G phones were sold globally by the end of March 2022, with the technology accounting for 42% of phone sales in Q1. Mobile service revenue is currently increasing by over 4% per annum (levels not seen since 2012) and 5G’s contribution to growth has been an important factor here.
China, South Korea, and the US have been the major 5G markets in 2020 and 2021. At the start of 2022 these three countries accounted for 76% of the world’s active 5G users; 5G accounted for 20% of all mobile connections there, versus a 2.3% share in the rest of the world. 5G growth remains very strong in these countries (over 25% of connections were on 5G by June) though in the first half of 2022 other regions have started to build momentum too.
- Elsewhere in Asia-Pacific, there is strong momentum in developed markets and it is encouraging to see developing economies such as the Philippines and Thailand also enjoying healthy growth with 5G subscriptions up from 7 million at the end of 2021 to over 12 million by June 2022 in those two markets.
- In Oceania, 5G subscriptions in Australia have increased almost 40% in the first half of 2022 and now account for 22% of mobile connections (where 5G has helped deliver a significant improvement in Optus’s FWA performance).
- In Europe, Western Europe’s 5G performance is benefitting from 5G’s strong share of over 70% of smartphone sales in the first half of 2022. There has been increased focus in 2022 on TDD 5G coverage (mainly using C-Band) to complement DSS coverage layers in some markets, which will help to lift the region to over 150 million 5G connections by the end of this year.
- In Latin America, 5G momentum is starting to build with 5G connections increasing over 130% in Brazil in the first half of 2022 and 5G subscriptions starting to register in Chile. As in Europe, 5G in Latin America is built on both DSS and increasingly TDD deployments.
Capable of 8-10x the download speeds of 4G, 5G is delivering enhanced value through an improved user experience for migrating customers. Analysis from Opensignal shows 5G smartphones typically enjoy a 2-3x speed gain over 4G models from the same vendor and in developing economies such as the Philippines 5G download speeds outperform both 4G and Wi-Fi by a 5-8x ratio. These performance gains can be seen in usage profiles, with South Korea’s MSIT reporting average data usage per 5G customer (26.8 GB) at 3.3x 4G (8.2 GB) in June 2022, while the ratio in China is estimated at over 2x. Similar dynamics in other markets are contributing to a consumer willingness to spend more on larger data plans with 5G or to upgrade to faster services where experience-based pricing models are in operation in markets such as Finland. DNA Finland’s 5G smartphone users consumed 33GB per month in 2021, 15% higher than 4G smartphones and nearly 7x higher than 3G phones, while 5G modem use of 231GB was 115% above 4G levels. 5G operators in some markets have also used content-based service bundling to encourage higher monthly spend and expose users to more relevant 5G-enhanced content services such as cloud gaming, UHD video, and AR/VR. These user experience and pricing dynamics are contributing to healthy ARPU uplift (of typically 10-20%) as users upgrade from 4G to 5G and healthy differentials between 4G and 5G ARPUs. For example 5G ARPUs are 1.3x higher than 4G in the US, and 1.6x higher in South Korea and China.
In addition to value generation from migrating 4G use to 5G, operators are also unlocking new revenue streams from 5G. The 5G fixed wireless access market has been a new revenue stream for a growing number of operators, making a healthy revenue contribution in Gulf states and the US in particular, though also important in a number of European markets such as Finland, Austria, Germany, and Switzerland. For operators such as Austria’s Magenta and Switzerland’s Sunrise, 5G FWA has been a useful anchor for FMC propositions outside of fiber coverage. In its Gulf state markets, 5G has lifted Zain’s revenues in Saudi Arabia and Kuwait as 5G has helped to transform a >1 million FWA customer base ARPUs 30% higher than 4G, while in the US T-Mobile now has over 1.5 million FWA customers contributing roughly 1.5% to postpaid revenue. 5G private networks are also a new business domain being actively targeted by operators. China is leading in this respect, with a focus on using network slices on 5G standalone rather than dedicated on-premises capacity, with operators there supporting over 4,200 5G private networks at the start of the year. These cover a broad range of industrial use cases with larger volumes in manufacturing (e.g. Midea’s industrial Internet platform), mining (e.g. China Telecom’s smart mining system), ports, and healthcare. South Korea is arguably not far behind, with smart factory solutions in particular seeing healthy growth since 2020, while operators in other regions are also building momentum, such as Telefonica Germany’s 5G hospital network in Leipzig, Vodafone’s 5G intermodal railway hub in Hungary, Orange’s 5G ports in Le Havre and Antwerp and MTN launching 5G smart mining in South Africa.
Operators cannot afford to be left behind on 5G. While there can perhaps be some debate about whether strong 5G smartphone sales in developed markets are a function of consumer interest and demand for 5G or of the growing prevalence 5G in device portfolios, there is no escaping 5G’s status as the ‘latest and greatest’ technology where consumer and enterprise value will ultimately flow. In the US, T-Mobile’s strong leadership in mid-band 5G network deployments (using 2.5 GHz while AT&T and Verizon have waited to begin 3.5 GHz services until 2022 and having twice the mid-band population coverage of either) is delivering a 5G market share more than five percentage points above its overall market share and more 5G FWA customers than Verizon and AT&T combined. For smaller operators, there can be gains to make from using 5G as a platform for growth. For example, in South Korea, LG Uplus enjoyed some early market share gains through an aggressive 5G network deployment and a strong focus on 5G-enhanced content; it’s 5G market share still trends above its 4G share, it has increased its revenue share by approximately one percentage point and has also unlocked revenue of over US$23 million from 5G content exports by playing an active role in the XR content ecosystem in particular.
Strategy Analytics’ smartphone experts forecast that 5G will account for 60% of global smartphone sales by Q4 2022. As we noted in a December 2021 blog, 5G leaders have outperformed 5G followers on key financial KPIs and these results still hold true. As 5G device sales continue to grow through 2022, the risk from being late with 5G services and compelling offerings increases. We continue to see strong revenue growth potential in 5G services and revenue uplift where operators have been able to deliver user experience gains and attractive content and services. It is encouraging to note that those operators who have committed most to 5G network quality and service development have seen the greatest gains in performance.