5G-Advanced: underpinning a monetisation imperative

5G take-up continues to grow. Adoption has now reached around 20% globally but is considerably higher in most of the vanguard countries. China (with 45% adoption), South Korea (49%) and the US (57%) are among the most populous countries in this group. The pace of 5G adoption since launch has been the fastest of any mobile technology generation. 4G took twice as long to reach this level, while 3G was around 2.5× slower. The reasons are well established and include wide handset availability with declining price points, expanded network coverage, faster speeds, high levels of competition among operators on airtime prices, and relief from Covid-era macro pressures. 

China is home to a fast developing 5G story and has a growing gravitational pull, given its impact on strategic industries and the content ecosystem in the consumer domain. Translating its 5G adoption rate into absolute connections numbers – 810 million – underscores its sheer size. By 2030, China’s 5G connections base will exceed 1.6 billion, accounting for around a third of the global total despite being home to less than 20% of the global population. 

The imperative for operators is to monetise this connections growth beyond the marginal levels reported to date. Most of the revenue uplift attributable to 5G on the consumer side has so far come from price premiums in return for higher speeds and data allowances. This is fine and justified but ultimately not sustainable, because the price premiums will eventually be competed away. The enterprise segment has more incremental revenue upside but this has not yet materialised beyond marginal levels.

China offers a useful case study. The imminent arrival of 5G-Advanced networks with 3GPP Release 18 (the next phase of 5G) provides an upgrade that increases the ability to monetise several enterprise and consumer applications more than has been possible to date. This includes low-power IoT with RedCap, FWA broadband, and a range of higher bandwidth streaming and entertainment categories that could draw on extended reality (XR). 

How much more do 5G customers lean towards entertainment categories?

Percentage of contract customers who have added, or are interested in adding, a given entertainment subscription to their tariff

Source: GSMA Intelligence

Beijing trial: leading the way

I had the opportunity to speak at Huawei’s 5G Evolution Summit at MWC Barcelona 2024. The discussion focused on monetisation strategies that can form the basis of network transformation upgrades.

An important question for 5G-Advanced is how to balance the goals of high network performance and cost effectiveness. Huawei and China Unicom have undertaken a trial in Beijing to this effect. The trial brings together an approach to balance low and high frequency band spectrum such that coverage and capacity layers are both delivered. To date, China Unicom’s 5G network in Beijing has become robust. However, the fast rising traffic profile and concentration in dense, urban areas mean further upgrades and rearchitecting are necessary to ensure performance. The following network KPIs for China Unicom in Beijing underscore this: 

• approximately 4,000 sites support 200 MHz spectrum 
• 5G coverage is at parity with 4G 
• utilisation can reach over 90% in the busy hour.

The trial set up a network to integrate high-band spectrum with mid-band holdings (3.4–3.6 GHz, 4.8–5.0 GHz). Drive tests of the network indicate peak download rates of 10 Gbps with a continuous (i.e. sustained and uninterrupted) rate of 5 Gbps. The network strategy uses a handover algorithm rather than carrier aggregation to link the spectrum holdings, preserving capacity only when it is needed in real time (such as at a sporting event). This means high-bandwidth use cases (e.g. VR gaming at an e-sports venue, or glasses-free 3D) can be serviced while maintaining coverage across the network and indoors, given that lower band propagates better through walls. Higher uplink speeds were also achieved, which helps with high-definition video streaming and other bandwidth-intensive applications such as VR. 

Outlook

The partnership and trial are a good indication of how 5G-Advanced networks can be set up to balance performance and coverage. This also plays to the demand requirements for 5G networks in serving lower latency use cases: wide area coverage, adaptable for AI, and deterministic. The situation in China is in some ways more pressing than other countries on account of the rapid take-up of 5G in numbers and usage. Data usage per 5G customer will rise from 13 to 54 GB per month by 2030 (or 23% per year), faster than subscriber growth of 11%, implying a higher usage intensity as people use more bandwidth-heavy apps.

China is likely to license millimeter wave spectrum at some point in 2024, though the allocation amounts – which will have an impact on capacity – are not yet known. If the allocation does go ahead, China would be the most prominent country on the 2024 calendar for a millimeter wave release, joining the 50 countries that have already done so. It would also provide regulatory certainty to chipset makers and device OEMs to incorporate high-frequency spectrum in their portfolios, in turn driving scale economies to help reduce handset and other CPE costs. These are all positives to go alongside the product monetisation of operators using this type of 5G network. We would expect to see other operators consider this deployment model for 5G-Advanced where spectrum holdings permit, even if that is at the local or regional level rather than on a national scale. 

MWC23 demonstrated 5G’s growing maturity, especially in pioneer markets, such as China, South Korea and the US, where the technology has now attained mass market adoption. In these markets, the conversation has shifted from consumer adoption to accelerating 5G standalone deployment and unlocking new features of 5G, including those to come with 5G-Advanced. Meanwhile, a second wave of 5G momentum has now begun, led by Brazil, India and Indonesia. These markets will help take the total number of 5G connections globally to 1.5 billion by the end of this year (GSMA Intelligence).

It is fair to say that Africa was largely missing from much of the discussions around 5G at this year’s event – and for good reason: as of today, only 13 of the 50+ countries in the region have launched commercial 5G services. Additionally, 4G – at less than 25% adoption – still has significant headroom to grow, while only seven countries (Angola, Kenya, Mauritius, Nigeria, South Africa, Tanzania and Zambia) have assigned 5G spectrum to date. In contrast 4G was the dominant technology in other regions at the advent of 5G. Added to these are valid concerns around the cost of 5G deployment and the affordability of devices and services for most users. 

Last year, GSMA Intelligence conducted a survey (the 5G Africa Survey) of key stakeholders, including policymakers, operators and vendors, and enterprises to understand the outlook for 5G in Africa. Insights from the survey, published in the report 5G in Africa: Realising the potential, point to high expectations for 5G to enable digital transformation, boost tech innovation, and help meet the connectivity needs of people and businesses in Africa. Several government (e.g Côte d’Ivoire, Egypt, Kenya and Morocco) have outlined digital transformation plans that could benefit from key 5G. 

This sentiment was echoed by various stakeholders at MWC23, including government ministers and regulators and industry players, such as Arm, Huawei, Orange and Qualcomm, at various forums (Watch my chat with Benjamin Hou, President, Huawei Northern Africa Carrier Business here ). However, the general consensus, as was highlighted in our report, was that Africa’s approach to 5G rollout will be unique and reflect the various industry and macro realities on the ground. 5G rollout, for example, will likely take a phased approach in Africa, with initial focus on urban areas and industrial locations , as opposed to mass population rollout as we’ve seen in advanced markets.

These views begin to paint a picture of what the 5G era in Africa could look like as well as the enabling factors, as we highlight below:

• 4G will coexist with 5G for the foreseeable future – 4G adoption still growing and with significant unused 4G capacity, operators will focus in the near term will be on increasing 4G uptake. 4G adoption in Africa will continue to rise, reaching 46% in 2030 (GSMA Intelligence). For context, global 4G adoption peaked at 60% in 2022 and is now falling. As such, initial 5G deployments will be on a 4G core and targeted at eMBB (enhanced mobile broadband) connectivity for the consumer market. 

• FWA is an important 5G use can in Africa – In addition to eMBB, FWA (fixed wireless access) will be an important 5G use case in Africa. FWA particular will benefit from the poor fixed-line infrastructure in Africa and could emerge as the primary form of fixed connectivity to homes and businesses across the region. GSMA Intelligence research shows that around a third of 5G commercial mobile launches in Africa include a 5G FWA offering – a relatively high proportion at this early point in the generational cycle.

• Device costs need to come down further – 4G adoption was largely held back by device affordability, and the impact of the same on 5G could be significant. 5G devices are usually the biggest cost factor for consumers, given that 5G upgrades are offered at little or no premium in most cases. 5G-ready handsets are now available for as low as $150 in some markets, but this remains prohibitive for most consumers in Africa, especially if they have to pay for the device upfront. That said, the rollout of 5G in large, developing markets with similar income levels to countries in Africa (e.g. India and Indonesia) could further incentivise the mass production of more affordable devices, while financing solutions could also help to offset the impact of prohibitive upfront costs. 

• Timely access to the right amount of spectrum is essential – the importance of spectrum across different (low, mid, and high) bands cannot ne underestimated.  Here, the message to regulators is clear: make available 100 MHz of contiguous spectrum per operator in prime 5G mid-bands (e.g. 3.5 GHz). Lower bands (below 1 GHz) are also required to provide wide-area capacity and ensure that 5G reaches everyone. Meanwhile, GSMA research shows that as demand increases, a total of around 2 GHz of mid-band spectrum will be required for 5G per country, on average, by 2030. A number of frequency ranges have the potential to help support future mid-band needs, including the 3.5 GHz range (3.3–4.2 GHz),  and 4.8 GHz and 6 GHz bands. Beyond spectrum availability, the cost of spectrum also has a major impact on network deployment and access costs for consumers.

• Infrastructure sharing is vital for cost-effective deployment – Infrastructure sharing is not new in Africa, but it’s role in the 5G era will be even more significant for keeping costs down and accelerating rollout in the context of 5G’s densification requirements. It is important that regulators recognise this opportunity and offer a reasonable expectation of approval for

voluntary network sharing deals as well as simplify planning procedures and regulations for

site acquisition, colocation and upgrades of base stations. 

In an article I wrote for the African Business magazine in 2020, I argued that when the time is right, Africa would learn from the experiences of the 5G early movers and benefit from proven technologies and the economies of scale in devices and network equipment. That time is now, with various new solutions from vendors (e.g Huawei and Qualcomm) reflecting many years of experience and learnings from advanced markets. The maturity of the 5G ecosystem, as evidenced by cheaper and more widely available devices, and innovative network deployment solutions, bode well for Africa’s 5G outlook. 

Kenechi Okeleke, Director, Regional, Social and Policy Research, GSMA Intelligence 

Fintech was clearly a hot topic at MWC23: there were 90 exhibitors in the fintech category, numerous keynotes and side sessions as part of one of the conference’s five themes.

There was even a 4YFN winner. 

Fintech has become more prominent in recent years, partly due to the impact of the Covid-19 (coronavirus) pandemic on digital services. As more consumers take a digital-first approach to many lifestyle services (for example shopping and entertainment), and new services and applications become mainstream (for example the metaverse and Web3), fintech will be an important tool for people and businesses to fulfil transactions in a digital environment.

This reality, unsurprisingly, is attracting innovation and significant amounts of investment into the fintech space. For example, 2021 was a bumper year for fintech companies, with KPMG figures placing total investments at $225 billion. Although investor sentiment fell in 2022, mainly due to the deteriorating global political and macroeconomic environment, the fundamentals of growth including high demand, digital-centric lifestyles and enabling regulations remain strong.

In this context, mobile operators around the world are waking up to the fintech opportunity, as well as the challenge from the growing number of fintech start-ups pouring into the space (it is estimated that there are now more than 26,000 fintech companies around the world). In many ways, the fintech opportunity today mirrors the digital content opportunity a decade ago. As then, the argument now is whether operators should bother to compete with more nimble start-ups. Unlike a decade ago, however, operators no longer have the luxury of strong revenue growth from core services and largely underpenetrated markets. Consequently, the imperative to diversify service offerings is now stronger than ever and fintech represents low-hanging fruit for operators to capitalise on.

Of course, operators are not entirely new players in the fintech ecosystem; several operators in Africa and other developing regions have been offering a variety of mobile financial services (MFS) through mobile money for the better part of the last two decades. The latest GSMA Mobile Money State of the Industry Report shows total transactions value reached $1 trillion in 2021, with Africa accounting for over 70% of that figure. However, a question that often arises, and for which there are different views, is whether mobile money can be competitive with other fintech services, and drive profitability for providers and impact for consumers. 

The GSMA Intelligence team at MWC23 explored this topic extensively in meetings, keynote sessions and other forums with various industry stakeholders. In all conversations, one recurring theme stood out: mobile money is no longer just about providing basic financial services to the underserved, it is now a mainstream financial service in markets where it is offered. 

For example, Chris Meng, Vice President of Huawei’s Northern Africa Carrier Business, talked about the vendor’s one-stop platform, which powers Ethio Telecom’s Telebirr and Safaricom’s M-PESA, and provides flexibility for operators to add new applications and services on a mobile wallet base. Frehiwot Tamru, CEO of Ethio Telecom, disclosed that Telebirr reached 29 million customers in less than two years after launch, with products such as merchant payments and microcredit, and Sitoyo Lopokoiyit, Managing Director, M-Pesa Africa, highlighted his company’s consumer products for 59 million users as well as its solutions for 730,000 businesses and 59,000 developers. (Watch my chat with Chris Meng, Vice President, Huawei Northern Africa Carrier Business here). 

So, what did we learn at MWC23? A lot. Here are a few takeaways: 

• The MFS landscape is evolving – MFS has been through three phases. The first phase, which started before 2010, was characterised by basic money transfer and cash-in cash-out (CICO) services. Here, mobile money helped to reduce the financial exclusion gap in low- and middle-income countries. The second phase between 2010 and 2020 saw fintech start-ups come up with solutions to integrate MFS into peoples’ lives, enabling digital payments for a wide of range of digital services, such as e-commerce and online gaming. The third phase, which picked up at the start of this decade, is underpinned by the inclusion of credit services into MFS offerings. This has the potential to open up new opportunities in the consumer and SME markets for operators going forward.  
• Regulation is a key enabler – The success of MFS to date, along with its future growth, is a function of the policy and regulatory environment. MFS has taken root in markets where operators have been allowed to lead the deployment of services, for example Cameroon, Côte d’Ivoire, Egypt, Morocco and (more recently) Ethiopia, while discussions are ongoing in several others, notably Algeria, Libya and Tunisia. Enabling regulations go beyond just permitting operators to play in this space; they facilitate collaborations with other ecosystem players and partners, such as banks, existing fintech players, and various public and private institutions to implement mobile payment and credit solutions. 
• Diversification and innovation will drive future growth – There is a strong argument that mobile money service diversification and innovation – based on a business model that is agile, adaptable and collaborative– will be critical for success. To this end, the concept of the ‘super app’ – where an operator uses a one-stop app to provide access to multiple services through a single interface to create new financial solutions – is being talked about a lot more, following a number of deployments. For example, M-PESA’s super app enables customers to download ‘mini-apps’ within the app to complete tasks like ticket booking, deliveries, shopping, licence applications, insurance etc with businesses, government agencies, utilities and other firms. 

For operators, especially in developing regions, fintech is a matter of how, not if – considering the growing opportunity and the need to create new revenue streams in an increasingly challenging competitive environment. As I highlighted in my keynote on this topic at the North Africa Operations Transformation Forum (OTF), held at MWC23, critical success factors include having the right solution and building the partnerships with relevant ecosystem players. The number of fintech exhibitors and suppliers at the event, including Evina, Huawei, and MobiFin, to name a few, certainly point to the potential for the mobile industry in the fintech space. 

Kenechi Okeleke, Director, Regional, Social and Policy Research, GSMA Intelligence