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6 November 2019

5G diversification is starting: 2025’s MNOs will be a far more diverse group

Last week saw China’s three main mobile operators activating their 5G services, resulting in the world’s largest 5G network overnight and expansion plans that take the technology to a whole new scale. But despite all the bragging rights – the jaw-dropping number of base stations, the complex architectures – the Chinese trio have the same challenges as their counterparts elsewhere, in terms of making 5G pay for itself.

Their recent financial results have been lackluster and it is not clear how much additional revenue China’s data-hungry consumers will deliver. As the 5G roll-outs mount up round the world, the operators are starting to assess their monetization strategies more publicly. And while the first wave of commercial 5G networks and services look pretty similar to one another, in phase two, the MNOs are set to diverge significantly in their business plans.

The first 5G networks are uniformly Non-Standalone, leveraging a slightly enhanced LTE core; and they are almost uniformly targeted at existing, familiar customer bases and applications, with a heavy emphasis on video and gaming, and for some operators, a shift to fixed/mobile offerings with the addition of fixed wireless access (FWA).

But the operators are well aware that they need a more dramatic departure from their 4G mobile broadband model, if 5G is to deliver strong returns. For some, this will mean investing heavily in enterprise and IoT services, which will require a 5G core, a Standalone network and some significant differences in network planning and optimization – as Sprint’s head of IoT made clear last week.

For others, it will be about slashing costs with increased network sharing – Poland is leading the way here – and a hefty dose of automation. Still more will explore wholesale models, or increased densification to address in-building, transport and city requirements. And those with fixed networks, such as the UK’s BT/EE, are considering how increased convergence could improve their efficiencies, competitiveness and range of services.

By the mid-2020s, we expect the world’s MNOs, especially those in saturated, developed mobile economies, to look far more diverse than they do today. The era when every MNO focused on mobile broadband and voice – with differentiation focused heavily on price, data rates and handsets – will be ending, and while those MBB-oriented operators will still be an important group, and more price-sensitive than ever, there will be a far greater variety of models. Some of the new services will come from existing operators which have evolved their strategies, or merged with other MNOs; some will be delivered by new entrants including neutral hosts and enterprise specialists. But one thing is clear – only this commercial diversification will deliver profits for the bulk of MNOs, and for users and businesses, the full promise of 5G connectivity.