As countries around the world ease pandemic-related restrictions on consumers and businesses, it is abundantly clear operators and smartphone vendors now inhabit a fundamentally changed economic landscape. Covid-19 (coronavirus) sent shockwaves through every sector of the economy, and while it has been better insulated than some, the telecom industry will inevitably feel the effects of the 3 per cent global GDP contraction the IMF predicts for this year.

Operators and smartphone vendors are now facing the ominous dual prospects of a severe global recession and a prolonged slump for traditional in-store retail, where most phones were sold before the pandemic.

Through the economic gloom, there is nevertheless some good news for smartphone manufacturers. At a basic level, lockdowns have, if anything, further demonstrated the critical importance of mobile devices for enabling everything from remote business transactions to staying connected to friends and family to prevent social isolation.

Beyond this, there are at least two more positive notes which should help the industry this year:

Despite some delays, many countries have forged ahead with planned 5G rollouts this year. The rollout of the new networks should be a boon for smartphone vendors, as it is during this time that operators are the most likely to engage new manufacturers and make changes to their roster of suppliers.
Although brick-and-mortar smartphone retailers face enormous challenges as a result of the pandemic, operators and vendors have spent years developing robust online sales channels which can fill the gaps left by traditional retail.

So we expect that, like most consumer categories, smartphones will be in for a bumpy ride, but ongoing 5G rollouts and a new emphasis on digital retail channels offers hope and should form a lifeline for the industry which will help it ride out the economic turbulence ahead.

New launches, new opportunities
Even as the pandemic raged, operators were still making moves to prepare for the 5G era: in May, with lockdowns still implemented across much of Europe, Oppo and Vodafone, for example, announced a deal to bring Oppo 5G handsets to customers across the continent. These kind of moves are by no means limited to Europe: in a recent survey [1], 81 per cent of operators globally indicated they planned to make changes to their smartphone vendor roster in 2020.

[2]And the most important factor they consider when adding a new vendor? 5G compatibility (see chart, right, click to enlarge). The Oppo/Vodafone deal is a perfect example of what many operators will look to do as 5G becomes more prevalent: add a vendor which can bring a full complement of 5G handsets available at a variety of budget-friendly price points.

And the price point of the handsets should start to matter now more than before the pandemic, when our survey was in field. With millions unemployed and countries facing a dire economic outlook, it is safe to assume an annual or bi-annual device upgrade, often with only minor improvements over the last model, will for some consumers be put on hold for the foreseeable future. Instead of incremental upgrades, the operators we surveyed are betting support for 5G network technology is what will drive consumers to invest in a new smartphone. Obviously, operators will therefore prefer manufacturers which have an array of affordable 5G handsets available, which poses a significant problem for those who do not.

Of the top three smartphone vendors in the world, only Samsung is currently well positioned to succeed in this emerging landscape where operators emphasise 5G compatibility above all else. The others have significant challenges to overcome:

Apple has not yet released a 5G iPhone, and there is a great deal of uncertainty as to whether it will do so this year.
Because of the US-led sanctions, Huawei phones lack a full complement of Google applications, putting them at a significant competitive disadvantage.

As we discuss in a new report [3], this creates room for smaller players to manoeuvre, potentially enticing operators into new distribution deals if these manufacturers can differentiate on 5G capability or on the (increasingly important) price factor.

A seismic shift in retail strategy
While operators and vendors are betting big on 5G phones to withstand the forecasted economic downturn, they must simultaneously adapt to a threat to their largest channel of smartphone sales: the high street retailer. The worsening economy and the emergence of post-lockdown social distancing measures pose an existential threat to brick-and-mortar shops.

Before lockdowns, operators reported a majority (52 per cent) of their smartphones were sold in-store, but also said they expected stronger growth in online sales over the next two years. As we have seen elsewhere [4], the pandemic condensed multiple years’ worth of predicted industry trends into a few short months, and with high street retailers facing massive obstacles, we expect online sales to overtake in-store in short order. In fact, AT&T in the US and Virgin Media in the UK have already announced they will be closing some or all of their retail outlets as a result of the pandemic.

For a device segment often thought to be reliant on “hand feel” to guide purchases, the rapid shift to online as the dominant sales channel could further complicate an already challenging situation for smartphone manufacturers. Vendors with strong and established direct-to-consumer online sales channels are obviously best positioned to succeed in this new landscape, and we may see the arrival of new marketing strategies as vendors look to reorganise around online channels in the medium- and long-term. But for the short term at least, because operators seem prepared to rely on their speedy new 5G networks to drive interest in new handsets, it is here that smartphone manufacturers must also focus their attention to stay aligned with operators and maximise their opportunities to forge new alliances.

The way forward for vendors
Vendors must adapt to operators’ laser-focus on their 5G networks and the reduced importance of brick-and-mortar retail in order to thrive in the post-lockdown world. But how can smartphone manufacturers best navigate these challenges?

An important step for vendors is to understand operator plans for driving 5G uptake and tailoring their messaging to build on this theme. One way to do this is to emphasise the importance of new phones in influencing 5G upgrade intent among consumers: our research [5] shows that across seven markets which have or will launch 5G in 2020, a brand new 5G handset can boost upgrade intent by about 10 per cent. Knowing where their customers stand on 5G is one of the keys for vendors to unlock new strategic partnerships with operators that will help both thrive in the new economic landscape.

Vendors can also ensure they are supporting the move to online sales by shifting the co-marketing resources given to operators to market their devices to online and social channels. This can help to smooth the transition and avoid a precipitous decline in device sales.

These strategies will allow manufacturers to adapt to the challenges that the pandemic has ushered in. They will also have long-term benefits for both operators and vendors, as the current state of affairs is likely to be more than temporary. Preparing for the new normal is important and necessary for the industry to withstand the turbulent times ahead, and move with confidence into the next phase of the 5G era.

– Jason Reed – lead analyst, Digital Consumer, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://data.gsmaintelligence.com/research/research/research-2020/device-portfolios-and-strategies-in-the-5g-era
[2] https://www.mobileworldlive.com/wp-content/uploads/2020/06/GSMAi_smartphone_vendor_qualities.jpg
[3] https://data.gsmaintelligence.com/research/research/research-2020/the-rising-tide-of-5g-will-all-smartphone-vendors-be-lifted-
[4] https://data.gsmaintelligence.com/research/research/research-2020/the-zoom-boom-surge-in-video-conferencing-sharpens-operator-minds
[5] https://data.gsmaintelligence.com/research/research/research-2020/the-rising-tide-of-5g-will-all-smartphone-vendors-be-lifted-

The Covid-19 (coronavirus) pandemic and resulting widespread shift in working patterns and increased demand for home entertainment has thrust communications and the resiliency of telecoms networks to the fore. The outbreak has, and will continue to have, sweeping effects on all aspects of the global economy. As social distancing and travel disruption continue to impact supply and demand, a reduction of global GDP growth by 4.5 percentage points is expected in 2020, with a direct knock-on effect to the telecoms sector [1] among others.

However, the impact of Covid-19 could well be magnified in emerging markets, which are disproportionately impacted by falling commodity prices, reduced international investment, decreased incoming remittances, rising foreign debt burden and large itinerant worker populations. So, while much of the media coverage has focussed on the shifting epicentres, first China, then Europe and the US, here we want to examine how the outbreak will affect the development of the mobile ecosystem in countries perhaps less well equipped to deal with it, despite admirable efforts to cushion the impact.

Digital divide is accentuated in a pandemic
Mobile is the primary access technology in emerging markets: fixed broadband subscriber penetration is around 11 per cent, while mobile internet penetration exceeds 40 per cent. This does, however, still leave a significant proportion of the population unconnected (see chart, below, click to enlarge), and the pandemic has brought to the fore how detrimental that digital divide is.

[2]

As a result of lockdowns, many have turned to the internet to maintain a sense of community, access education or crisis information, and safeguard a limited level of economic activity. But billions of people across emerging markets who are still unfamiliar with the internet are excluded from opportunities to overcome the social and economic limitations of self-isolation, while governments without established digital platforms are less able to effectively manage the pandemic and the associated economic fallout.

There are some specific areas where the limited use of mobile internet services exacerbates the impact of lockdowns: [bullets]

Education: following the closure of schools and other educational institutions, millions of students now depend on remote learning. Although 1.4 billion mobile subscribers around the world already use a phone to improve their education or that of their children, the shift to online solutions for remote learning is leaving many behind. Some governments have had to turn to non-interactive technology, such as radio and television, to provide a minimum level of educational continuity for those unable to use the internet. For example, the Rwanda Education Board (REB) began broadcasting educational radio programs on weekdays on 4 April, starting with literacy lessons for primary school students, while in Malaysia, a new TV channel called TV Okey from the public broadcaster Radio Televisyen Malaysia (RTM) was launched on 6 April to deliver educational television programs to all students, especially those without internet access.
E-commerce: the limited uptake of digital services in emerging markets is preventing businesses from moving to e-commerce or other online platforms to maintain a level of continued consumption. For example, the GSMA Intelligence Consumer Survey 2019 showed fewer than 20 per cent of smartphone owners across sub-Saharan Africa and Developing Asia (excluding China) use their devices to purchase goods regularly (at least once a month), compared with around 50 per cent in Europe and North America.
Information: the effective distribution of crisis communications largely depends on digital channels, and the capability of individuals to discern trustworthy sources and advice apart from manipulated information. This poses a challenge for those who have not been online before.

Operators also face different challenges versus counterparts in higher income regions
Operators in emerging markets face several unique challenges. With retail outlets closed, many have lost their direct handset sales channel, which GSMA Intelligence Operator Device Survey 2020 showed accounts for nearly 40 per cent of all smartphone sales in emerging markets (excluding China). Some operators, for example in South Asia, have already increased third-party sales channels including bank ATMs, pharmacies and grocery stores, but as these efforts are reactive, operators are failing to capture the full revenue potential and not maximising consumer engagement. Emerging markets are also mostly prepaid (84 per cent versus 36 per cent in developed markets), meaning operators are more exposed to customer spend reductions.

Meanwhile, the risk of potential delays to network builds is growing. Auctions of 5G spectrum are already starting to slip as operators seek additional spectrum for 4G to handle the jump in network traffic. In Brazil, for example, operators have requested a delay to the 5G spectrum auction while they assess long-term financial impacts. India’s 5G spectrum auction has similarly been postponed from 2020 to 2021 at the earliest: Reliance Jio and Bharti Airtel have also asked the regulator for additional 4G spectrum. Yes, 5G isn’t the biggest priority for many emerging markets right now, but it is still vital for timelines not to slip too far so the gap between emerging and advanced countries doesn’t widen further. At the same time, though, some emerging markets, for example India, see 5G as a key stepping stone in their transition to a fully-fledged digital economy, so delays are unfortunate.

When a challenge becomes an opportunity
It’s not all negative though, as the digital ecosystem has proved vital in the response to Covid-19.

Operators have increased mobile data packages and even made data free in many cases to help users access information, and health and education services, while participants from the entire digital value chain including operators, vendors, internet players and governments are pulling together to support people during lockdown and prepare for a return to normality once the pandemic ends. As a side effect of more people working remotely or having to stay at home, mobile operators have been granted a unique opportunity: they can/should leverage the boost in the adoption of mobile services (for example video calling for business, online collaboration tools, video streaming, e-commerce and mobile payments) to grow their role in people’s lives.

Likewise, despite the challenges facing the industry, times of crisis can serve as a driver of technological advancement and, in some cases, 5G is already proving its worth. For example, in various countries (including China and Cambodia), operators have launched 5G-enabled telemedicine services which allow doctors to assess patients via video. And while working from home has already been an option for office workers for some time, 5G can provide an enhanced experience for virtual meetings and, of course, higher network capacities, making it an important tool to help meet new traffic demands.

The outlook for emerging markets ensconced by the pandemic is fluid and will continue to be monitored closely. The human cost has been terrible, and the repercussions will likely reverberate for decades, but emerging countries could well have been given the stimulus needed to start catching up to their developed counterparts. Governments with weak digital economies have been given a warning to ensure they are never placed in such a vulnerable position again, while populations with, up until now, limited awareness of the benefits of the mobile internet have all of a sudden had their eyes opened to how essential mobile services can be.

– Jan Stryjak – senior manager, Mobile Operators and Networks Research, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://data.gsmaintelligence.com/api-web/v2/research-file-download?id=51249608&file=030420-Covid-mobile-networks_2.pdf
[2] https://www.mobileworldlive.com/wp-content/uploads/2020/06/GSMAi_Emerging_Market_Digital_divide.png

A few weeks back, an operator customer asked if I would present some findings from the Network Transformation research we did late in 2019 to their executive committee, with a focus on open networking technologies. How are operators looking at open tech? How quickly are they moving on it? How are they positioned in comparison to what we’re hearing from other operators around the world? It’s the best part of the job when you’re an analyst.

Then, just as I was congratulating myself for prepping a full draft almost one week early, a handful of announcements were made which made me rethink the key messages I would focus on, one from Rakuten Mobile and two from Mavenir.

The news from Rakuten Mobile [1] got plenty of press coverage. That’s to be expected from nearly anything the operator does on the networks front, but this time it was a little different. Rather than just innovate in the delivery of services (and the deployment of its network) in Japan, new work with NEC aims to offer 4G/5G core capabilities to customers across the globe.

Mavenir, meanwhile, put out two decidedly less showy announcements focused on system integration partnerships with General Datatech and Goodman Networks. Each covered backing for open RAN deployment in the US, including solution planning and design; supply chain management; warehousing and logistics; deployment and testing; RF optimisation; performance monitoring; field services; and lifecycle support.

Flashy or not, though, the core message from each of the players was similar.

Bear with me for a moment: I understand the announcements were fundamentally different. Rakuten Mobile is moving forward on a new business model for offering 4G/5G core network capabilities on a global basis. Mavenir is developing partnerships for deploying open RAN hardware and software in the US. Ultimately, however, each company is focused on a similar aim: making open networking solutions easier to acquire and deploy.

In Mavenir’s case, this is done by engaging third parties to help add professional services capabilities to their networking solutions. In Rakuten Mobile’s case, this acquisition and deployment support comes in the form of new commercial models tied to cloud native network assets.

Now, this might seem like a relatively straightforward message (who doesn’t want to make technology easy to consume), but there is a key message here: open networking technologies, including open RAN, are not necessarily easy. It’s an important message because it tends to get lost in the (well-deserved) noise around the word open, despite the fact open source, open networking and virtualisation technologies represent the same type of telecom sea change as the move from circuit to packet networking.

Compared with solutions which leverage proprietary interfaces (or standardised ones which are not open) and/or proprietary hardware, open and virtual solutions are often positioned as a panacea for complicated deployments and commercial arrangements. This positioning falls down on two fronts.

Expertise. Integration issues ranked number two when we asked operators about the major obstacles to introducing open source and open networking technologies: 55 per cent see this as a challenge. In part, this can be seen as a function of will: the willingness of incumbent vendors to integrate with new suppliers and technologies. At the same time, it can be seen as a function of expertise, the in-house skills and capabilities necessary for integrating new technologies. This is where system integration support with a specific focus on open comes in handy.
Go-to-market. Even where an operator has the skills to integrate new open technologies into their network, or have partners in place to help, suppliers need to deliver those technologies in ways which are easy to consume and form a part of solutions, not just point products. Well, they need to do that if they want to reach the vaunted position of partner and be successful in their sales efforts. System integration offers help on the solution part. Cloud consumption models help with the consumption part.

And what does all mean for my customer and my presentation?

Well, the operator is by no means small, and its commitment to open RAN solutions is well known. But the fact it is still engaging with outside experts (along with people like me) to talk about their progress, technology challenges, business challenges and market trajectories is a testimony to the fact open networks and related technologies might be important, but that doesn’t mean they’re easy.

– Peter Jarich – head of GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://www.mobileworldlive.com/featured-content/home-banner/rakuten-looks-beyond-japan-with-fresh-nec-deal/

Earlier this quarter, we looked at Sri Lanka [1] and its roadmap to become a prime 5G candidate. But there are plenty of countries looking to move into 5G, so this month we’re taking a peek at Taiwan as the country gears up for the next generation by leveraging its strong fundamentals.

Taiwan enjoys a dynamic telecom landscape, characterised by excellent infrastructure and intense competition among the top three operators Chunghwa Telecom, Far EasTone and Taiwan Mobile, which have a combined market share of around 85 per cent and actively shape the industry.

The market is also well-equipped, with attractive product offerings and abundant supply of handsets. Sitting on a strong foundation, the operators are expected to launch 5G services in Q3.

Let us look at the factors defining the market readiness for 5G and how they are driving Taiwan on to the 5G road:

High data adoption: Taiwan is one of the few countries, besides Niue and Tokelau, to achieve 100 per cent 4G penetration. Not only this, Taiwanese subscribers are ardent mobile internet users, with average monthly data consumption of 25GB per capita, making it the second-highest mobile data consumer after Finland.
Operators preparing for 5G: In early 2020, operators spent $4.6 billion to acquire 5G spectrum, leading it to become the third most expensive auction for the technology in the world, after Italy ($7.6 billion) and Germany ($7.4 billion). Such high prices resulted from intense bidding, but also highlight operators’ willingness and readiness to launch 5G services.
Then, in March, the top three players announced subscribers with existing 4G monthly plans of TWD1,399 ($TK) will be able to upgrade to 5G at the same price. However, Taiwan Star challenged these biggies by unveiling 5G tariffs at less than half their price, TWD599 in a clear attempt to drive the technology into the mainstream and attract subscribers ahead of the service launch.
Collaborations and support: Operators have been aided in their 5G plans by work with other operators, vendors and the government. Taiwanese operators are building partnerships with South Korean players (such as SK Telecom and KT) to access their experience in delivering 5G services and digital content. In the wider ecosystem, vendors including Ericsson and Nokia secured contracts with operators for 5G rollout and joint promotion of the technology. In order to march ahead with 5G technology, the Taiwan government allocated $648.2 million over the period 2019 to 2022 for the development of services and applications.

In view of these developments, we can say that Taiwan is ripe to propel towards a more advanced 5G market.

Now if we look at the 5G footprints globally, there are 38 countries which had launched the technology by end-May, and this number is expected to increase to 52 countries by Q3. In other words, when 5G comes to Taiwan, it will be later than many other markets. In fact, it will be approximately two years after South Korea launched the world’s first 5G network. Despite the delayed entry, GSMA Intelligence forecasts it to be among the top five countries by Q4 2025, with 5G penetration around 48 per cent thanks to the solid backbone of the market (see chart, below, click to enlarge).

[2]

Hold on though. Yes, there is always a but.

While we expect solid 5G adoption, revenue growth is expected to remain flat over the next few years. Classic story, right? But it’s worth looking at why.

Consumer 5G uptake will be positive in terms of connections. But with no premium likely to be placed on tariffs and a market history of price wars, we see revenue remaining flat until 2025.
The operators have already spent heavily on acquiring 5G spectrum. The major players are already facing declining revenue and profit from their core businesses. Combined with an expectation of higher operational costs, expecting revenue and profit growth would seem unwise.

So, where might we look for additional revenue opportunities?

Where traditional consumer services aren’t expected to drive growth, new non-core and B2B services may hold the greatest promise for growth. The advent of 5G technology can accelerate new services and use cases, for example cloud gaming, streaming content, and enterprise cloud and connectivity. GSMAi research showed B2B enterprise revenue [3] varies from 10 per cent to 50 per cent of operator revenue, with 30 per cent as an average across ten top operators. This suggests a lot of potential upside.

Many of these dynamics, strong interest in 5G and expectation of growth beyond traditional consumer services, are not unique to Taiwan. It would be noteworthy to see Taiwan leveraging its ICT industry capabilities and ecosystem to drive additional value and 5G momentum, where it could outpace its own benchmarks and fully leverage the 5G opportunity.

– Charu Paliwal and Divya Bhargava – team leads, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://www.mobileworldlive.com/blog/intelligence-brief-should-sri-lanka-push-4g-or-5g/
[2] https://www.mobileworldlive.com/wp-content/uploads/2020/06/GSMAi_Taiwan_Connections_by_Tech.png
[3] https://data.gsmaintelligence.com/research/research/research-2020/operator-revenue-in-the-enterprise-market