Morgan Stanley: Hello Europe, 5G is on the line!
by Emmet Kelly, Head of European Telecoms Research for Morgan Stanley
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.”
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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.
EE launches commercial 5G service in UK
U.K. wireless network operator EE has officially launched commercial 5G services in a number of U.K. cities, the telco said in a release.
The carrier said that 5G services are initially available in London, Cardiff, Edinburgh, Belfast, Birmingham and Manchester.
EE will also be introducing 5G across the busiest parts of Bristol, Coventry, Glasgow, Hull, Leeds, Leicester, Liverpool, Newcastle, Nottingham and Sheffield during the rest of the year. In 2020, Aberdeen, Bournemouth, Brighton, Cambridge, Dundee, Exeter, Ipswich, Norwich, Plymouth and York will receive 5G coverage, EE said.
The telco said that consumers and businesses can order 5G devices, including smartphones from Samsung, OnePlus, LG, and Oppo, a mobile broadband device from HTC, and a 5G home broadband router from Huawei.
The operator also said it expects customers to experience an increase in speeds of around 100-150Mbps even in the busiest areas.
EE said that the commercial launch is the first phase of the telco’s 5G rollout: a Non-standalone 5G New Radio deployment focused on using the combined power of 4G and 5G technologies. Phase 2, from 2022, will introduce the full 5G core network, enhanced device chipset capabilities, and increased availability of 5G-ready spectrum.
EE said that higher bandwidth and lower latency, coupled with expansive and growing 5G coverage, will enable a more responsive network, enabling immersive mobile augmented reality, real-time health monitoring, and mobile cloud gaming.
A third phase, beginning in 2023, will introduce Ultra-Reliable Low Latency Communications (URLLC), network slicing and multi-gigabit-per-second speeds. This phase of 5G will enable critical applications like real-time traffic management of fleets of autonomous vehicles and massive sensor networks.
Rival telco Vodafone recently announced that it will commercially launch its 5G network in seven cities across the U.K. on July 3.
The telco said that the new technology will be commercially available for both consumers and business customers.
Vodafone also said that it will also offer 5G roaming in the U.K., Germany, Italy and Spain over the summer. Initial 5G services will be available in Birmingham, Bristol, Cardiff, Glasgow, Manchester, Liverpool and London, while Birkenhead, Blackpool, Bournemouth, Guildford, Newbury, Portsmouth, Plymouth, Reading, Southampton, Stoke-on-Trent, Warrington and Wolverhampton will follow later this year.
Last year, U.K. telcos obtained spectrum for the future provision of 5G services. BT-owned EE won 40 megahertz for which it paid £303 million ($395 million). Three secured 20 megahertz of 3.4 GHz spectrum at a cost of £151.3 million. Vodafone won 50 megahertz of spectrum in the 3.4GHz frequency band after paying £378 million, while Telefónica-owned O2 picked up 40 megahertz for £318m.
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