In the early years of mobile communication, carriers around Asia enjoyed tremendous revenue growth, driven by new subscribers, new technology and new spectrums. Unfortunately, revenue growth has been hard to come by since the industry reached maturity in the business life cycle.
Last year, mobile service revenue declined by 0.2% year-on year in South Korea, 2% in Singapore and 5% in Malaysia. Japan's wireless industry has seen stagnant revenue growth of only 2-3% annually in recent years, amid intense competition for a finite number of subscribers.
The question is, how can mobile operators manage to survive and boost their top-line growth in the long run?
5G, or the fifth generation of mobile technology, might be one of the answers. 5G is expected to enable more stable connections and blazing fast speeds -- at least 10 times faster than 4G LTE. This means users can easily download all seven seasons of the Game of Thrones within seconds.
However, 5G is not only about speed or "a 4G software upgrade". If we define 4G as the smartphone era, 5G will surpass that. 5G promises higher capacity, greater flexibility and fewer delays, making it much more reliable than any wireless technology currently available. Its advanced networks will support myriad new applications, including the Internet of Things (IoT), smart cities, mobile virtual reality, drones and autonomous driving.
Mobile operators will therefore derive additional revenues from these new services. A recent study by Ericsson has shown that 5G could add up to approximately US$600 billion in revenue opportunities for mobile operators within the next 10 years.
In anticipation of this, several Asian carriers have been busy developing and conducting 5G experiments. For example, the leading South Korean operator SK Telecom successfully demonstrated a 5G field trial by using the 3.5 GHz spectrum in July. NTT Docomo, the largest operator in Japan, plans to conduct a similar 5G trial later this year, with the aim of launching commercial 5G networks by 2020. Singapore's biggest mobile network carrier, SingTel, has also joined with Ericsson to pilot 5G technology for the first time in Southeast Asia.
Globally, the road toward 5G is looking smooth and bright. Nevertheless, a transition to new technologies is always painful and presents several challenges, ranging from standardisation to regulations. At present, 5G technical standards have yet to be finalised and will not be ready until 2020, making it difficult for operators to plan an earlier launch and ensure global interoperability.
Apart from this, 5G could also drive capital expenditure to record highs. Judging from historical data, mobile network investment in Asia rises at least 20% with each network evolution, and 5G will be no exception. Mobile operators will have to build more small cells and denser fibre backhaul networks to create an ultra-fast and ubiquitous 5G network, requiring massive capital outlay. Operators therefore need to find other options to reduce capital burdens, such as leasing 5G networks or using 5G network-sharing models.
Acquiring adequate spectrum is another key challenge to building out superior 5G networks. In the 5G era, new higher-frequency spectrum will be required to fulfill gigabit connectivity, such as "millimetre" wave spectrum over 24 GHz. Mobile operators, therefore, should ensure spectrum availability, while governments and regulators alike have to allocate sufficient spectrum in an appropriate and timely way to support 5G.
Despite several challenges, there is still light at the end of the tunnel. Some Asian regulators have already started outlining a spectrum roadmap for 5G mobile services. For example, Japan's Ministry of Internal Affairs and Communication recently published "Radio Policies Towards 2020s", suggesting three frequency bands that could be 5G candidates. China's Ministry of Industry and Information Technology has also issued an open public consultation, seeking advice from both mobile operators and other stakeholders on a plan to use millimetre-wave spectrum for 5G services.
Looking at our country, the National Broadcasting and Telecommunication Commission (NBTC) has laid out a roadmap calling for an auction of the 2.6 GHz spectrum by next year in order to prepare for the eventual introduction of 5G services in 2020. The NBTC also aims to further recall unused spectrum, including 700 and 1500 MHz, for auctions in the near future, and plans to revamp relevant regulations to keep pace with the fast-changing world of technology.
Major mobile carriers have recently teamed up with leading telecom vendors, such as Huawei and Ericsson, in preparation for unleashing the first-ever 5G system in the country.
The road to 5G has just started and is still years away from widespread use. The potential for 5G and what it can bring to the telecom industry is still difficult to predict. Can it become a new growth engine for the telecom businesses? Or will it be just another tech buzzword for users to get excited about?
EIC, a unit of Siam Commercial Bank Public Company Limited, offers in-depth macroeconomic outlook and sectoral impact analyses. For more information, please visit www.scbeic.com or contact eic@scb.co.th