Morgan Stanley: Hello Europe, 5G is on the line!

by Emmet Kelly, Head of European Telecoms Research for Morgan Stanley

Introduction

5G technology promises to deliver faster download speeds, a far more efficient use of the mobile spectrum and denser networks with fewer white spots. For both industries and consumers, 5G will better enable technology like the Internet of Things to power smart factories, drive connected cars and use wireless locators to find a lost pet or house keys.

Despite high anticipation for 5G, one of the key questions is launch timing. Some U.S. operators have already rolled out limited 5G services in select U.S. cities, and operators in China, South Korea and Japan are prepping to launch 5G in the next 6 to 18 months. However, the 5G outlook in Europe is still somewhat of a question mark, with 2021-22 often cited as a launch date.   Some industry observers say European telcos are sending a weak signal on 5G launch dates. But the new technology could launch earlier than expected.

Delays for Europe?

Why are European telcos broadcasting such a weak signal on 5G? First, 4G has hardly been a financial success for operators in Europe, which begs the question: “Why rush to 5G?” Indeed, European mobile-service revenues have declined by more than 25% since 4G was first rolled out seven to eight years ago.

Second, European operators may decide that waiting is the best strategy, since a delayed rollout will likely bring cheaper 5G kit prices, and a greater selection of 5G handsets. European telco balance sheets are also more stretched now than they were in 2010, so cheaper 5G kits could help margins.

Lastly, immediate use cases for 5G have yet to emerge, with the possible exception of Fixed Wireless Access, which would make 5G a replacement for wireline broadband.

…Or Perhaps Not?

That said, an alternative view is emerging that 5G could launch in Europe earlier than some expect. Telcos may note that early adopters of 4G saw decent market-share gains of up to two percentage points and may seek to replicate this success with early 5G adoption.

Additionally, some European government bodies have noted that the high expense of 5G could spark wireless consolidation. If mobile consolidation happens, 5G would likely emerge soon afterward.

A final consideration for telcos: Could 5G reveal the next killer app? For example, the launch of 4G laid the groundwork for wireless video to emerge unexpectedly as the predominant use case. Abundant 5G use cases have yet to reveal themselves, to which some industry watchers say: “Build the network, and the killer apps will come.”

References:

https://www.morganstanley.com/ideas/europe-5G-launch-2019

https://www.morganstanley.com/ideas/us-5G-rollouts-2018?cid=228977584:428065928:99793987

One thought on “Morgan Stanley: Hello Europe, 5G is on the line!

  1. Europe gears up for 5G without increasing network Capex

    France, Britain and Italy have already held 5G spectrum auctions. Germany will auction 5G spectrum in the new-year.

    Mobile operators, which are facing hyper competition to retain their wireless subscribers, are spending for fiber-optic cables and looking to densify their networks to guarantee latency for 5G services.

    European mobile service providers aren’t raising capital investment, telecoms bosses told the Morgan Stanley European Technology, Media and Telecoms conference in Barcelona this week, Reuters reported.

    Many operators are preparing their mobile towers for sale or signing partnerships with infrastructure companies that would run them in exchange for fees. The idea is to raise funds from the sale of telecom towers. They expect 5G will start generating revenue streams.

    GSMA has already warned that Europe lags the United States and parts of Asia on rolling out 5G services for providing wireless broadband to the home and powering connected factories or machines.

    GSMA has also revealed that telecom operators should focus on enterprise business to create value from their 5G network investment. Focusing on connectivity services for retail users will not be sufficient for generating returns from 5G.

    “5G may be the trigger for deals,” Tobias Martinez Gimeno, CEO of Spain’s Cellnex, said. Cellnex has telecom tower portfolios in France, Spain, Italy and the Netherlands, and is keen to move into new markets like Germany.

    Deutsche Telekom CEO Tim Hoettges said the market leader in Europe’s largest economy is folding its assets in Dutch and Austria into its towers unit, which runs 28,000 base stations. The company is willing to consider a sale of the telecom tower business.

    Vodafone CEO Nick Read said that the telecom operator, which made a huge loss due to the merger of its India business with rival Idea Cellular, could increase the utilization of assets such as the 58,000 masts in Europe by encouraging rival operators to use them or selling a stake to an operator.

    https://www.telecomlead.com/5g/europe-gears-up-for-5g-without-increasing-network-capex-87503

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