Intelligence Brief: China on brink of breaking 200M 5G connection mark

Recently, the Ministry of Industry and Information Technology (MIIT) of China revealed more than 150 million terminals were connected to 5G networks, up from 100 million a month ago.

Based on this, GSMA Intelligence have updated the 5G forecasts. Where does it leave us? We now expect that, by the end of the year, 5G connections in China will surpass 200 million (see chart, below, click to enlarge). This means about one-in-eight of the total consumer mobile connections will use 5G networks.


The rapid growth can be explained by four drivers:

The post pandemic economic recovery. In Q3, quarterly GDP growth turned positive as most business activities are back to normal, including the retail market, which helps device sales. Moreover, a big e-commerce promotion day, the double eleven shopping festival in November, will help drive 5G device sales.
Increased options of 5G handsets with a wide price range. Vendors have started to shift their focus from 4G to 5G. Search handsets on major Chinese e-commerce platforms such as taobao or JD and the first few pages are dominated by newly released 5G models. Of course, the iPhone 12 5G is heavily marketed on major social media platforms but, beyond high-priced flagships, some 5G smartphone prices have dropped below CNY2,000 ($298). According to the official data from the regulator, 5G models have kept more than 60 per cent of total handset shipments since June.
The story looks similar to the 4G migration in 2015. We are at another junction: the new generation phones are becoming the norm. Following the history, we can expect 4G models would be kicked-out from the new lines in the future.
Attractive 5G data tariffs for data crunchers. 5G is available at a much cheaper per-GB-price than 4G. Far before the handset price dropped, operators started their promotions on 5G data tariffs. Those offers can be purchased without a 5G device, meaning customers can enjoy the price advantage on data, however they will only have 4G speed. This strategy generated a big gap between reported 5G package users from the operators and real connections. Many customers felt the 5G data price was attractive while the handsets were not. Recently, however, it appears many of them have purchased 5G handsets with the vendors’ promotion as mentioned above, which contributed to the jump over the last month.
Fast network rollout. Without a promising coverage, customers will still not be motivated to buy a new 5G handset. Luckily, Chinese operators have built 60,000 base stations, 20 per cent over their target set at the beginning of the year. The regulator prioritised 5G as a long-term strategic plan at the national level. This helps put pressure on operators to accelerate deployment.

The pay off
Monetisation of 5G consumers remains work in progress. No 5G premium is charged and the per-GB price is cheaper than 4G. Chinese consumers spend lots of time on their mobile phones. They watch TV content, short videos, live streaming and play games with mobile data. And they pay subscription fees to content providers and feed advertising revenue to platforms. But direct revenue from consumers to operators only comes from data package charges. 5G might, hopefully, shift consumers to a higher price band of data packages or take revenue from fixed broadband providers. We need to wait and see if year-end ARPUs do increase with 5G uptake.

Whether or not consumer 5G pays off at a sound pace, the deployment for the consumer segment can open opportunities for B2B 5G sales, including for the public sector. The network rollout usually follows a trace of population density and urbanisation, where those cities have big pressure on infrastructure maintenance, traffic management, and public resources allocation. 5G use cases of smart cities are exactly addressing those issues. Self-driving buses/taxis are also a benefit to public transportation, helping improve transport efficiency and safety. Trials of those use cases are happening in China. Therefore, operators can look for the synergy between B2B and B2C in the deployment cost.

The most important message from the jump of 5G connections is that customers are willing to pay for fast speeds and new use cases. After all, a new phone would be used for more than two years, which is long enough for innovation in consumer applications. While everyone expects B2B to be the most important incremental revenue opportunity in the 5G era, most of the B2B models can’t stand without the consumer segment. Now that 5G has kicked off, it is super important to track and assess future growth and value opportunities for all stakeholders.

– Gu Zhang 张谷  – senior forecaster, Core Data, 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.


Intelligence Brief: Why is mmWave the new hotness?

Apologies if you’ve heard this story before, but one of the first projects I worked on as an analyst was a research piece focused on opportunities for the use of 28GHz spectrum in the US. Recent auctions had just taken place for what was being called Local Multipoint Distribution Service (LDMS) spectrum and people wanted to know what the market was for services in the band.

Ultimately, the use case that gained the most attention was broadband connectivity to enterprises, think fibre-like competition which would enable a new era of telco competition. And, ultimately, that use case didn’t actually propel those competitors to major success. Maybe it was because of their business cases. Maybe it was technology limitations: I recall a conversation at the time with a colleague who did not believe mmWave spectrum could be used for anything other than point-to-point connectivity.

Regardless, here we are 20-plus years later and mmWave spectrum is getting more attention than ever, and it’s worth considering why. Despite what the events of the past week suggest, it’s about more than just the:

iPhone 12. The headline news with the new iPhone is 5G compatibility. Whether or not that is critical for would-be iPhone users, it’s particularly important for operators which want to move traffic on to their new 5G networks. And, for operators in the US which want to get users onto mmWave 5G, there is compatibility for that too. It’s not the first smartphone with mmWave 5G, but the massive demand for the iPhone ensures it will generate lots of mmWave traffic, and information.
Spectrum assignments. The US might get most of the attention when it comes to mmWave (along with support from Apple), but it’s not alone in assigning the spectrum for 5G. Thailand, Hong Kong, Taiwan, Singapore and Finland have all assigned it. And Greece, Chile, Argentina, Brazil and Australia have awards planned. This means we will be seeing more demand for mmWave devices, more experience with how 5G works in the band and, of course, mmWave economies of scale.
6G. I’m sure the mere mention of the next G will cause many people to groan. Forget for a moment technology vendors and industry organisations like ATIS have begun talking-up 6G. We’ve already seen speculation on the spectrum it might operate in: sub-mmWave or Terahertz. Sure, this is approaching infrared light. More importantly, it also highlights the industry will need to figure out the economics and mechanics of mmWave 5G in the mid-term.
Data demand. On the topic of mmWave 5G economics, it all begins with a very simple premise: increased data demand driven by myriad high-bandwidth use cases will make the use of mmWave spectrum a necessity. Sure, you could argue new spectrum is never really needed. It’s possible to simply keep shrinking cell sizes and densify networks to dizzying heights. But there is a point where siting and the associated costs become untenable.
TCO. Data demand versus siting costs versus. infrastructure costs versus spectrum costs versus use cases all capture a dynamic which can be described in four words: Total Cost of Ownership (TCO). Where the TCO of using mmWave spectrum for 5G is greater than using other spectrum, there’s no reasonable expectation operators would put it to use. And, to be fair, evaluating this TCO has traditionally difficult given the newness of using it. But, circa 2020, we can begin to estimate mmWave 5G TCO. In fact, it’s something my team is currently engaged in. Initial results look positive: you can learn more by tuning into a presentation we’ll be giving as part of Qualcomm’s 5G Summit.

What’s not captured in the list above, though, may be the most important reason for all the attention: the fact that connecting our phones via mmWave spectrum is even possible. You don’t need to go back in time 20 years or more to find very real discussions about the viability of using high-frequency spectrum for personal communications. “It’s basic physics”, was a common refrain from many camps claiming it would never work. At best, they’d claim, the use case would be fixed, not mobile.

Put aside the potential and market momentum, the mere fact we now have mass-market phones and networks compatible with mmWave bands and networks is an impressive feat, and something worth the buzz all by itself.

– 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.

Intelligence Brief: Will 5G iPhone change the game?

Apple will hold a virtual media event today (13 October) at which it is expected a new iPhone with 5G capability will be unveiled.

The would-be successor to its most recent models, the iPhone 11 and lower priced SE, carries with it extra intrigue because Apple is a relative latecomer among handset manufacturers to the 5G era. While this would not be the first time Apple has eschewed a rush to market approach, the stakes are higher now with new iPhone sales constrained by longer upgrade cycles and, of course, the Covid-19 (coronavirus) pandemic.

There is also the question of whether Apple can inflect broader 5G adoption single-handedly by introducing the world to a feature it did not know it needed. We explore potential implications below both from the perspective of Apple and 5G take-up more broadly.

Rush to buy or wait and see?
The first question to understand is the likelihood of current iPhone owners to upgrade to a 5G model. The positive for Apple is that it commands a fiercely loyal customer base. Our survey data indicates more than 90 per cent of iPhone owners want their next phone to be another iPhone, well above any other handset manufacturer. Furthermore, with their higher-than-average levels of income, the Apple user base is better positioned to afford the new handset and the accompanying 5G mobile tariffs than its competitors.

A number of factors, however, indicate take-up may not follow a mass migratory path:

Upgrade intentions are still middle of the road. Our survey data (see chart, below, click to enlarge) suggests existing iPhone owners are no more likely to upgrade to 5G than others, with both it and Samsung just under 40 per cent in the US (the situation is similar in Europe). [1]
Retail constraints. Apple’s brand ethos, customer-friendly browse and try shopping, and reliance on the mobile operators as a distribution channel means it has historically benefited heavily from in-store sales. The Covid-19 (coronavirus) pandemic has resulted in widespread operator retail closures, which means that 35 per cent to 40 per cent of handset sales through the mobile operators will move online, or be delayed until social distancing measures are relaxed. Despite Apple’s own well-established brick-and-mortar retail network, reduced appetite for in-store shopping over the Christmas/holiday sales period could blunt new iPhone sales.
Income pressures. Set against a context of already-lengthening replacement cycles, discretionary income pressures brought on by Covid-triggered reduced work hours or unemployment could further slow purchase volumes beyond an initial wave of keen adopters in the holiday season. Part of this will come down to how a new iPhone is priced. In reviewing the more than 50 5G handset models released so far, the median retail price is just over $800 (Samsung and Huawei generally being at the higher end while Oppo and Vivo are at the lower end). Apple has traditionally released the base model of a given iPhone generation at $1,000, a 25 per cent premium to the prevailing rate, something Apple customers have been happy to pay in the past but may find less space to do so in the current economic environment.

For Apple, the next iPhone marks a crossroads
The iPhone has been the primary driver of Apple’s success as a business and indeed socio-cultural icon over the last ten years. However, smartphone saturation and lengthened replacement cycles in the US and Europe, which have increased from two years on average in the LTE era to three-and-a-half years now, has precipitated a period of reduced sales growth to the point where, in calendar 2019, iPhone revenue declined 6.6 per cent on the prior year and now account for around 45 per cent of Apple’s revenue compared to more than 60 per cent two years ago. This is, of course, before any exacerbating effects from the pandemic.

In this context, the expected 5G handset launch represents not only its next model, but a gateway into Apple’s strategy for the next ten years. Beyond device sales, the strategic imperative for Apple is retaining customers in its content and payments ecosystem, the glue of its business model. For the time being, this strategy rests on a range of media including video streaming, music and gaming (health also plays a role but generally not a monetisable one). The company does not regularly disclose user counts for these services, but we can infer a somewhat tepid level of take-up based on figures released in the past.

Music, for example, reached 60 million customers at the start of 2019, equivalent to a 6 per cent conversion rate of the iPhone base. Apple TV+, its streaming service, is rumoured to have a take-up rate lower still, with a portion of such customers getting it for free.

The 5G model offers the company a chance to take advantage of new technical capabilities in the standard, particularly low latencies. Following the move to bundle many of its services under the Apple One banner, the technology may provide a vehicle for Apple to revive some of its flagging services by including them alongside those which stand to benefit from the new technology, such as Apple Arcade or Apple TV+. With mobile gaming, in particular, touted as one of the key use cases for 5G, Apple is likely hoping its entertainment subscriptions will lure users into the Apple One bundle and lock them into its services ecosystem.

The takeaway point here is that while the new iPhone is likely to follow past iterations of incremental technical advances, 5G technology offers Apple an opportunity to reset and reorient its longer-term services strategy.

What could it mean for overall 5G adoption?
Size, influence, brand power and heritage all mean that what Apple does matters. This is particularly the case for the mobile operators deploying 5G networks and attempting to sell the merits of higher-value data tariffs on new use cases. In 2011 to 2012, the iPhone was positioned as a flagship handset by many mobile operators keen to capitalise on the newfound ability to stream videos on a mobile phone, something that had not been possible before at any sufficiently good quality. The result was a period of sustained positive revenue growth, with pricing premiums applied for the higher speeds.

The challenge now with 5G is overcoming the perception among consumers that it is just another speed upgrade given LTE is quite able to handle most of the things people currently do on their phones. In this sense, it matters hugely how Apple positions any new services, especially those based on AR or VR, which take advantage of 5G’s unique capabilities given its past precedent for introducing the world to features it did not know it needed. More than any other factor including price, it is this X factor which will determine whether the past halo effect of an Apple launch will spread to the broader handset and operator community.

Stay tuned.

– Tim Hatt – head of research and 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.


Intelligence Brief: Can mobile help the world recover from Covid-19 and accelerate sustainable development?

Last month’s UN General Assembly session was unlike any other since the organisation was founded 75 years ago. In the first ever ‘virtual session’, world leaders stayed at home and delivered pre-recorded speeches to a mostly empty UN General Assembly hall. Nevertheless, despite the quiet corridors, there was a full programme. What’s more, the 17 Sustainable Development Goals (SDGs) [1] remained at the top of the agenda.

At the start of the year, the UN Secretary-General launched a “Decade of Action [2]”. While significant progress had been made since the SDGs were agreed by world leaders in 2015, it was recognised by governments and the international community that the world was not on track to achieve the Goals by 2030. The reduction in poverty was slowing down, the number of people suffering from hunger was on the rise, climate change was occurring much faster than anticipated and inequality continued to increase within and among countries.

The Covid-19 pandemic subsequently unleashed an economic and human development crisis. In addition to causing more than 1 million deaths, the economic and social impacts have been devastating. In the short term, global GDP is expected to fall by 4.9 per cent in 2020 – the largest contraction since the Great Depression – and over 90 per cent of the world’s student population were at some point unable to attend school. The UN expects that more than 70 million people will be pushed back into extreme poverty by the end of the year, the first increase in global poverty in more than two decades.

Mobile technology and sustainable development
In these unprecedented times, the GSMA recently published its fifth annual Mobile Industry SDG Impact Report [3], which shows that 2019 was the mobile industry’s most impactful year in terms of its contribution to the SDGs. Many people will be familiar with the connectivity figures highlighted in the report: 5.1 billion individuals (two thirds of the world’s population) using a mobile phone and 3.8 billion people (almost half the global population) using mobile internet. What is perhaps less well known is what people are using their phones for.

[4]Some of the most popular activities will come as no surprise, namely instant messaging, social networking, reading the news and watching online videos. But in recent years, there has been a notable increase in the use of other services (see chart left, click to enlarge). More than 2 billion people have now used mobile financial services, purchased goods online and accessed educational information for themselves or their children. More than 1.5 billion people have used their device to improve or monitor their health, or to look and apply for a job.

The benefits of getting people online and enabling these types of services are clear.

Since 2015, the increase in mobile adoption has driven an increase in global GDP of $360 billion (4 per cent of economic growth), as well as providing employment for five million more people (the industry now supports 30 million jobs worldwide). Mobile technology drives a reduction in Greenhouse Gas emissions that is 10 times greater than the carbon footprint of the industry. And a recent study [5] by the GSMA and the World Bank shows that mobile technology can reduce poverty. At a more personal level, the majority of mobile owners believe that their device helps them in their day-to-day work and studies, and also makes them feel safer.

This trend in usage is likely to have intensified since the outbreak of Covid-19, as individuals have become more reliant on digital services to adhere to lockdown and physical distancing rules and lower the virus transmission rate. However, while connectivity has provided people with a lifeline during the past nine months, Covid-19 has also reinforced the impacts of the digital divide, with the unconnected – who tend to be poorer and have lower levels of education – less able to mitigate the economic and social disruptions to their lives. Without an acceleration of efforts to connect the unconnected and increase the use of life-enhancing – or in many cases life-saving – services, the world will not be able to meet the ambitious targets that have been set for the next ten years.

Connecting the next half
The goal of achieving universal internet access is therefore more important than ever. This will involve addressing two connectivity ‘gaps’ that are highlighted in the recently-published State of Mobile Internet Connectivity 2020 report [6]: the ‘coverage gap’ (those living outside of areas covered by mobile broadband networks) and the ‘usage gap’ (those that live within reach of a network but are not using mobile internet).

The coverage gap now stands at just under 600 million (or 7 per cent of the global population), following continued network deployments in South Asia and Sub-Saharan Africa. The usage gap however stands at 3.4 billion people – six times larger than the coverage gap. There are many reasons for people not connecting and, encouragingly, there have been positive developments across several barriers to adoption. Adults in low- and middle-income countries are increasingly aware of mobile internet and the relevance it has to their lives. Affordability of both mobile devices and data continues to improve, particularly with the launch of new ‘smart feature phones’ priced at $10-20 and cheaper smartphones. Nevertheless, barriers around literacy and skills persist, affordability remains a significant challenge for the poorest in society and there are also increasing concerns around the safety and security of connecting.

Addressing all of these barriers will require a collective effort, and the measures that are needed extend not just to the mobile industry but also Governments, the local digital sector, global Internet companies, civil society and the international development community. The challenges of Covid-19 have led to more collaboration between these different players, which will need to continue over the next decade and beyond. Fortunately, there is now an opportunity to build on this cooperation by continuing to implement innovative and targeted initiatives that help to bridge the digital divide.

– Kalvin Bahia, Economist, 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.


The State of Mobile Internet Connectivity in Sub-Saharan Africa 2020

This month, the GSMA Connected Society team, in collaboration with GSMA Intelligence, launches the 2020 edition of The State of Mobile Internet Connectivity, accompanying the Mobile Connectivity Index.

In this video, Anne Delaporte, Senior Insights Manager at GSMA Connected Society programme and Federico Agnoletto, Senior Economist at GSMA Intelligence, discuss the key trends of mobile internet connectivity across Sub-Saharan Africa, over two themes: coverage and usage.

In 2019, only 26% of Sub-Saharan African population were using mobile internet, and the same proportion was still not covered by any broadband technology; referred to as the coverage gap. Meanwhile, nearly 50% of Sub-Saharan African population was living within the footprint of a broadband network, but still not using mobile internet services; referred to as the usage gap.