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The elusive 5G opportunity – Balancing 5G investments with revenue prospects

The 5G era is upon us, and this next-gen cellular networking technology is expected to have wide-ranging impacts, from consumer experience to robotic surgery to autonomous drones. Many see 5G generating tens of billions of dollars over the next 10 years through base connectivity, and the emergence of use-cases that provide significant leaps in efficiency, or drive new services that can be monetized. However, Indian telecom sector has not focused on 5G as much as some of their Asia-Pacific counterparts, and rightly so! Indian telcos have instead been focused on transforming their products, services, and operations, before jumping on to the 5G bandwagon.

The business case for 5G is opaque and will take time to stabilize
The Asia-Pacific region has been at the forefront of 5G deployments, momentum, and scale. South Korea’s pioneering launch has been well documented, closely followed by China’s deployment at massive scale.

Since then, Australia has been the other market to launch 5G, with Singapore, Hong Kong, Taiwan, and others expected to follow soon. IDC projects that the APEJ region will have nearly 700 million 5G connections by 2023, with nearly 75 percent of those connections coming from China alone. IDC expects most 5G service launches in APEJ initially to be based on the non-standalone (NSA) version of the 5G standard, although standalone (SA) launches will begin in markets, such as China and Singapore, in 2021.

5G networks will allow a host of prominent use-cases and applications, including enhanced mobile broadband (eMBB), massive machine-to-machine connectivity (mMTC), and ultrareliable low-latency communications (URLLC). These new use-cases and applications will span across both consumer and business segments and have the potential to create new revenue streams for CSPs.

However, any discussion of 5G must recognize that it will coexist with 4G for at least the coming decade. Many use-cases, as currently defined, either do not need the added capacity benefits of 5G or, if they do, are limited by infrastructure gaps that will be very expensive and time-consuming to plug.

IDC believes that even in 2023, 90 percent of enterprises will still be struggling to find killer 5G application and build a business case.

The need to look beyond just 5G
The immediate priority for CSPs is to get a fix on their spending priorities for 5G. According to Asia-Pacific Carrier Equipment Spending Analysis 2021, incremental CapEx to support 5G rollouts will grow at a CAGR of 93 percent over the next five years. CSPs around the APEJ region are busy identifying their target segments for 5G connectivity, and trying to map their needed investments to cater to the demand from these segments. Investments will need to be made across the board, from installing a new core network with the SA version of 5G to upgrading the transport layer to upgrade and densify the radio access network (RAN). Many CSPs are also carefully examining their role at the edge of the network, whether they can become service providers on their own or partner with hyperscalers and edge cloud providers to cocreate products and services for their customer base.

Although 5G delivers substantial performance improve­ments over previous generations in terms of speed, latency, and connection density, telcos need to translate that performance into business outcomes and revenue models. While the World Economic Forum pegs 5G’s impact as USD 3.6 trillion in economic output and 22.3 million jobs worldwide in 2035, few are willing to measure their ROI on such a distant timeline. Quantifying 5G’s value may require new ways of thinking about and measuring connectivity beyond subscribers, ARPU, or revenue.

What those new KPIs look like will not become apparent until the 5G matures and scales in the marketplace. At a minimum, the dialogue needs to shift from measuring a 5G’s value in isolation to understanding how it intersects with and enables new revenue opportunities beyond its immediate footprint.

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