The recently announced tie-up between Sprint and T-Mobile US [1] attracted widespread commentary, with opinions polarising around two opposing camps.

Consumer champions and a number of industry commentators have raised concerns about a potential reduction in competition in the US mobile market and the specific risk lower income consumers, in particular, will lose out as prices rise [2].

In contrast, T-Mobile and Sprint (and some commentators) have been keen to promote the deal as an enabler for jobs and investment, and specifically as a major catalyst for 5G deployments in the US. In the words of T-Mobile CEO John Legere: “Global tech leadership for the next decade is at stake…only the combined company will have the network capacity required to quickly create a broad and deep 5G nationwide network in the critical first years of the 5G innovation cycle – the years that will determine if American firms lead or follow in the 5G digital economy.”

It is worth taking a step back and seeing the deal for what it is: a classic case of mobile consolidation between two challenger operators. Unlike the previously rejected AT&T and T-Mobile merger in 2011 [3], the current deal would see the number three and four players consolidate to create a potentially more effective competitor with greater scale.

Despite the success of T-Mobile’s “uncarrier” strategy and resultant market share gains over the last few years, along with a recent improvement in Sprint’s own operating metrics (after several years of market share losses), both companies remain sub-scale relative to the two dominant players. AT&T and Verizon jointly control just under 70 per cent of the market’s total service revenues (see image below, click to enlarge), with scale benefits also allowing them to generate higher EBITDA and free cash flow margins.

[4]But, beyond the fact of the matter, what else can we say? Are there any lessons which can help sort out the polarised consumer-centric versus investment-centric views? While we might not be able to crown either camp a winner, there are interesting parallels with the mobile operator merger completed in Austria in early 2013 which took the country from four to three carriers.

In a highly competitive market with aggressive price competition, two smaller players (Orange and 3 Austria) were struggling to gain scale and justify network investments necessitated by the upgrade cycle from 3G to 4G. The merger was ultimately approved but this was contingent upon the imposition of a number of remedies [5]. These included the sale of some spectrum holdings; the opening up of the network to new MVNOs; and the reservation of new spectrum for a planned new entrant network operator. The latter remedy did not ultimately take effect as no fourth player entered the market.

As part of the merger approval process, 3 owner Hutchison made a number of claims in support of the deal, including that it would help to deliver a number of efficiencies including improved 4G coverage and quality of services. These claims were rejected by the competition bodies as not passing the burden of proof.

The traditional approach by European competition authorities when reviewing this, and similar, mergers has been to focus on consumer pricing, particularly likely short-term movements in price. However, a recent report by GSMA Intelligence took a different approach [6], retrospectively reviewing developments in the Austrian market and with a focus on the impact of the merger on other consumer benefits, including network coverage and quality (upload and download speeds).

The results of the analysis showed that the four-to-three mobile merger in Austria intensified competition in quality-related aspects and the resultant three-player market delivered more widely available and faster 4G services than those experienced in four-player markets. It also showed that a merger between the two smallest operators in Austria allowed them to significantly outperform other operators in Europe with a similar position in the market.

There is then a clear potential read across from the situation in Austria in 2013 (with operators needing to invest in 4G network deployments) and the timing of the recently proposed deal between Sprint and T-Mobile. The US (and other regions) are in the process of contemplating the business case and rationale for 5G deployments and the economic benefits of potential technological leadership in the race to 5G. Certainly the merger pitch from two companies differs from the one normally given to the financial markets: promises of more jobs and higher investment levels as opposed to redundancies and cost savings.

Although the outcome of the regulatory review remains uncertain, the example of the Austrian mobile merger introduces a wider range of factors for consideration and could play to the more business-friendly environment promised by the current administration in the US. Certainly the Austrian example suggests that T-Mobile’s comments on 5G investment levels should not be dismissed lightly.

– David George, head of consulting, 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/t-mobile-to-lead-combined-co-in-sprint-merger/
[2] https://www.mobileworldlive.com/featured-content/top-three/us_public_seek_price_cuts_from_merger/
[3] https://www.mobileworldlive.com/latest-stories/att-and-t-mobile-usa-end-39b-deal/
[4] https://www.mobileworldlive.com/wp-content/uploads/2018/05/gsmaisprint2.jpg
[5] https://www.mobileworldlive.com/featured-content/top-three/austria-operator-consolidation-deals-completed/
[6] https://www.gsma.com/publicpolicy/evaluation-hutchison-orange-merger-austria

With 5G continuing to dominate industry headlines, it may come as a surprise to learn that the world’s ninth largest mobile market, Bangladesh, only recently launched 4G services [1]. With over 85 million mobile users, however, it would be imprudent to understate the impressive development of the mobile industry and the critical role it plays in Bangladesh.

For one, the nascent but burgeoning digital ecosystem in the country has been underpinned by large-scale and rapid adoption of mobile services since the turn of the century: mobile subscriber penetration levels in Bangladesh have risen from just over 1 per cent in 2003 to half the population at the end of 2017, GSMA Intelligence data shows.

Further, the much anticipated launch of 4G services in February 2018 heralded an important step in the evolution of Bangladesh’s mobile industry, enabling faster and more reliable internet connectivity, and offering numerous consumer, economic and social benefits. When combined with the young and dynamic population in Bangladesh, the upgrade to mobile broadband networks also creates sizeable opportunities for start-ups and investors.

Take the case of Pathao, a Dhaka-based motorbike taxi-hailing service founded in 2015: last month it raised in the region of $10 million, in an investment round led by Indonesian taxi-hailing service Go-Jek, at a valuation in excess of $100 million. From on-demand motorbike taxi services to food delivery, as Pathao expands into new cities it has continued to diversify its services and is now developing a mobile wallet app aimed at reducing customers’ reliance on cash payments, which remains the main payment method in the country.

But not only does mobile connectivity continue to transform the ways in which the Bangladeshi society functions and interacts, it is fundamental to socio-economic development and the achievement of Bangladesh’s national development plan (Vision 2021 [2]), as well as the UN’s Sustainable Development Goals (SDGs). Mobile services are helping to address major challenges facing Bangladesh, from population growth and rapid urbanisation to poverty, inequality, natural disasters and climate change. Just last week, an app being launched by children’s charity Plan International and the Bangladesh government was cited as a game-changer in the ongoing fight against child marriage, an area where Bangladesh has amongst the highest rates in the world.

So, after almost three months since services were launched, how come the initial customer response to 4G has been dubbed tepid?

A 2G market: Bangladesh is a predominantly 2G, prepaid mobile market, with some of the lowest ARPU levels in the world. Only one-in-five Bangladeshis subscribed to mobile internet services in 2017, despite 3G networks covering more than 90 per cent of the population. Therefore, while part of the 4G adoption issues relate to customer reluctance to upgrade their 3G SIM cards, the fact remains there is a significant digital divide in Bangladesh.

Affordability: In this context, affordability is a major barrier to the uptake of mobile services in the country, with a higher cost of mobile access having a greater impact on the poorest consumers. From a 4G perspective, the affordability issue is compounded by the fact that, up to now, there has been limited availability of cheap 4G-enabled handsets in the market. Part of this is due to high levels of taxes and fees applied to the mobile sector in Bangladesh, which have an impact on the affordability of devices and mobile services.

Usability, skills and content: From a consumer perspective, other factors aside from costs, such as basic and digital literacy, usability, skills (for example digital skills and confidence in learning to use basic mobile phone functions), as well as the availability of locally-available relevant content, are important barriers too.

Infrastructure: More broadly, as the 4G rollout continues, tax and spectrum barriers in Bangladesh constrain mobile operators’ ability to invest in network coverage and expansion, which can have adverse effects on consumers. As mobile broadband adoption scales over time, the increased data demand will further strain network capacity, inevitably requiring even greater access to affordable spectrum. Without this, quality of service for users will suffer, impeding the adoption of, and engagement with, digital services.

So given this, what’s the outlook for 4G, and can Bangladesh continue to achieve its goals?

[3]First, it’s important to note the 3G lifecycle still has a long way to go before reaching maturity. As we can see in the accompanying chart (click to enlarge), 3G connections are only expected to overtake 2G connections in 2020, with 4G adoption gradually accelerating out to 2025, at which point 4G is expected to represent half of total connections thanks to a combination of gradually improving affordability (driven by falling smartphone prices) and greater 4G network coverage.

While the slow transition to mobile broadband technology in Bangladesh is, in part, a matter of timing, ultimately, the pace at which the digital divide will be reduced will depend on enabling a regulatory environment which is conducive to investment and helping to alleviate affordability barriers on the part of consumers. Nevertheless, by helping to promote digital inclusion and support the delivery of essential services, there is no question the mobile industry will continue to make a vital contribution to the economy of Bangladesh and achievement of its Vision 2021 as well as the SDGs.

– Mike Rogers, Senior Analyst, 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.

…

For further information, GSMA Intelligence recently published the second part of a deep dive report into the mobile industry of Bangladesh which can be found by following this link here [4].

[1] https://www.mobileworldlive.com/asia/asia-news/major-bangladesh-operators-launch-4g-services/
[2] https://www.mobileworldlive.com/asia/asia-news/mobile-offers-potential-to-drive-progress-in-bangladesh/
[3] https://www.mobileworldlive.com/wp-content/uploads/2018/05/bangladesh2.jpg
[4] https://www.gsmaintelligence.com/research/2018/04/country-overview-bangladesh/664/

With 5G continuing to dominate industry headlines, it may come as a surprise to learn that the world’s ninth largest mobile market, Bangladesh, only recently launched 4G services [1]. With over 85 million mobile users, however, it would be imprudent to understate the impressive development of the mobile industry and the critical role it plays in Bangladesh.

For one, the nascent but burgeoning digital ecosystem in the country has been underpinned by large-scale and rapid adoption of mobile services since the turn of the century: mobile subscriber penetration levels in Bangladesh have risen from just over 1 per cent in 2003 to half the population at the end of 2017, GSMA Intelligence data shows.

Further, the much anticipated launch of 4G services in February 2018 heralded an important step in the evolution of Bangladesh’s mobile industry, enabling faster and more reliable internet connectivity, and offering numerous consumer, economic and social benefits. When combined with the young and dynamic population in Bangladesh, the upgrade to mobile broadband networks also creates sizeable opportunities for start-ups and investors.

Take the case of Pathao, a Dhaka-based motorbike taxi-hailing service founded in 2015: last month it raised in the region of $10 million, in an investment round led by Indonesian taxi-hailing service Go-Jek, at a valuation in excess of $100 million. From on-demand motorbike taxi services to food delivery, as Pathao expands into new cities it has continued to diversify its services and is now developing a mobile wallet app aimed at reducing customers’ reliance on cash payments, which remains the main payment method in the country.

But not only does mobile connectivity continue to transform the ways in which the Bangladeshi society functions and interacts, it is fundamental to socio-economic development and the achievement of Bangladesh’s national development plan (Vision 2021 [2]), as well as the UN’s Sustainable Development Goals (SDGs). Mobile services are helping to address major challenges facing Bangladesh, from population growth and rapid urbanisation to poverty, inequality, natural disasters and climate change. Just last week, an app being launched by children’s charity Plan International and the Bangladesh government was cited as a game-changer in the ongoing fight against child marriage, an area where Bangladesh has amongst the highest rates in the world.

So, after almost three months since services were launched, how come the initial customer response to 4G has been dubbed tepid?

A 2G market: Bangladesh is a predominantly 2G, prepaid mobile market, with some of the lowest ARPU levels in the world. Only one-in-five Bangladeshis subscribed to mobile internet services in 2017, despite 3G networks covering more than 90 per cent of the population. Therefore, while part of the 4G adoption issues relate to customer reluctance to upgrade their 3G SIM cards, the fact remains there is a significant digital divide in Bangladesh.

Affordability: In this context, affordability is a major barrier to the uptake of mobile services in the country, with a higher cost of mobile access having a greater impact on the poorest consumers. From a 4G perspective, the affordability issue is compounded by the fact that, up to now, there has been limited availability of cheap 4G-enabled handsets in the market. Part of this is due to high levels of taxes and fees applied to the mobile sector in Bangladesh, which have an impact on the affordability of devices and mobile services.

Usability, skills and content: From a consumer perspective, other factors aside from costs, such as basic and digital literacy, usability, skills (for example digital skills and confidence in learning to use basic mobile phone functions), as well as the availability of locally-available relevant content, are important barriers too.

Infrastructure: More broadly, as the 4G rollout continues, tax and spectrum barriers in Bangladesh constrain mobile operators’ ability to invest in network coverage and expansion, which can have adverse effects on consumers. As mobile broadband adoption scales over time, the increased data demand will further strain network capacity, inevitably requiring even greater access to affordable spectrum. Without this, quality of service for users will suffer, impeding the adoption of, and engagement with, digital services.

So given this, what’s the outlook for 4G, and can Bangladesh continue to achieve its goals?

[3]First, it’s important to note the 3G lifecycle still has a long way to go before reaching maturity. As we can see in the accompanying chart (click to enlarge), 3G connections are only expected to overtake 2G connections in 2020, with 4G adoption gradually accelerating out to 2025, at which point 4G is expected to represent half of total connections thanks to a combination of gradually improving affordability (driven by falling smartphone prices) and greater 4G network coverage.

While the slow transition to mobile broadband technology in Bangladesh is, in part, a matter of timing, ultimately, the pace at which the digital divide will be reduced will depend on enabling a regulatory environment which is conducive to investment and helping to alleviate affordability barriers on the part of consumers. Nevertheless, by helping to promote digital inclusion and support the delivery of essential services, there is no question the mobile industry will continue to make a vital contribution to the economy of Bangladesh and achievement of its Vision 2021 as well as the SDGs.

– Mike Rogers, Senior Analyst, 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.

…

For further information, GSMA Intelligence recently published the second part of a deep dive report into the mobile industry of Bangladesh which can be found by following this link here [4].

[1] https://www.mobileworldlive.com/asia/asia-news/major-bangladesh-operators-launch-4g-services/
[2] https://www.mobileworldlive.com/asia/asia-news/mobile-offers-potential-to-drive-progress-in-bangladesh/
[3] https://www.mobileworldlive.com/wp-content/uploads/2018/05/bangladesh2.jpg
[4] https://www.gsmaintelligence.com/research/2018/04/country-overview-bangladesh/664/

Let’s return to the argument that 5G is a battle between nations – that the first markets (national or regional) to get to 5G will enjoy an insurmountable economic advantage, establishing 5G winners and losers in the near-term as 5G commercialisation takes hold.

Don’t get me wrong; I have no particular affinity for the argument. You might recall from our earlier analysis [1] that I’m somewhat suspect of the logic. Operators in different markets, after all, don’t directly compete and the technology suppliers who will power all of our grand 5G visions aren’t limited to selling their wares in their home country. Regardless, the argument isn’t losing any steam with people in positions of power. Consider recent comments from Wilbur Ross, the US Commerce secretary: “Whoever pursues it, whoever does it, we’re very much in support of 5G. We need it. We need it for defence purposes, we need it for commercial purposes.” It’s no wonder, then, that T-Mobile US and Sprint claimed 5G investment as a key driver behind their planned merger [2]. Seems like a solid way to build support, right?

Now, to be fair, there is a legitimate argument to be made for the risks of lagging too far behind in 5G. To recap our Intelligence Brief from two weeks back, a country which seriously delays on commercialising 5G could theoretically miss out on the innovations 5G networks and capabilities help to incubate. The question we posed, then, was how long of a lag would be too long?

Good news: we have an example to look at.

Similar to aspirations around 5G, 4G has been hailed as responsible for enabling a wide array of digital innovations – everything from video everywhere business models, to pervasive IoT and the sharing economy. And while, circa 2018, we might take solid LTE coverage for granted across most developed markets, it obviously didn’t get rolled out simultaneously across the globe. China, for example, might be today’s leading 4G market by subscribers, but it wasn’t always this way. So, when discussions around a Race to 5G between the US and China are invoked, it seems like looking at the history of 4G rollouts in each is a worthwhile exercise.

We all know China lagged in the race to 4G, but by how much?

[3]

[4]

Let’s look at this along two different dimensions: total LTE connections and share of connections on LTE.

China didn’t start ramping its LTE uptake until about the start of 2014 (see top chart, click to enlarge). It didn’t take long for China to reach about the same base of LTE connections as in the US (Q1 2015), but that was still four years after LTE rollouts and connection uptake began in the US.

And on the share of connections front? You could argue that this is the more important metric.

Where total LTE connections might signal the scale (and scale efficiency) opportunity, share of connections on LTE point to the technology’s reach within the market – the opportunity for LTE-driven innovations to touch people. Here, we could look at a few milestones. China reached the 25 per cent penetration mark in Q3 2015, about two years after the US (see bottom chart, click to enlarge). The 50 per cent penetration mark was hit in Q3 2016, a year after the US. But if we’re talking about a race, then the important milestone is when China caught the US, right? That would be sometime between Q3 and Q4 of 2017, more than six years after US consumers began experiencing LTE.

Clearly there was a massive lag in the Race to 4G between the US and China. And what have been the results?

Today, China maintains two of the top LTE networking infrastructure vendors. It remains a major LTE smartphone market for vendors from around the world, while generating its own top-tier smartphone makers. It’s executed on new LTE technology innovations like NB-IoT and leveraged LTE to power new business models innovations (for example, the on-demand pushbike rental craze). Ultimately, it would be hard to argue that the lag in getting LTE commercialised in China irreparably harmed the country.

That doesn’t mean there isn’t a feeling that 5G will be different, that nobody can afford to be late to the game. Because of how 5G will open up new enterprise business models. Because of how 5G will allow service providers to benefit from two-sided business models like never before – potentially on a global scale. Because of the way in which 5G is so intricately linked to massive technological movements like artificial intelligence, IoT and mass digitalisation. Because of the hope 5G can help establish competitive advantages if regulation can deliver support, not obstacles.

Hope, of course, springs eternal, no matter what past experience suggests. In this case, however, if 5G truly is a race between nations, history suggests it is much more akin to an ultra-marathon than a sprint.

 – 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/blog/intelligence-brief-the-importance-of-handicapping-the-race-to-5g/
[2] https://www.mobileworldlive.com/featured-content/home-banner/t-mobile-to-lead-combined-co-in-sprint-merger/
[3] https://www.mobileworldlive.com/wp-content/uploads/2018/05/gsma1.jpg
[4] https://www.mobileworldlive.com/wp-content/uploads/2018/05/gsma2.jpg

Let’s return to the argument that 5G is a battle between nations – that the first markets (national or regional) to get to 5G will enjoy an insurmountable economic advantage, establishing 5G winners and losers in the near-term as 5G commercialisation takes hold.

Don’t get me wrong; I have no particular affinity for the argument. You might recall from our earlier analysis [1] that I’m somewhat suspect of the logic. Operators in different markets, after all, don’t directly compete and the technology suppliers who will power all of our grand 5G visions aren’t limited to selling their wares in their home country. Regardless, the argument isn’t losing any steam with people in positions of power. Consider recent comments from Wilbur Ross, the US Commerce secretary: “Whoever pursues it, whoever does it, we’re very much in support of 5G. We need it. We need it for defence purposes, we need it for commercial purposes.” It’s no wonder, then, that T-Mobile US and Sprint claimed 5G investment as a key driver behind their planned merger [2]. Seems like a solid way to build support, right?

Now, to be fair, there is a legitimate argument to be made for the risks of lagging too far behind in 5G. To recap our Intelligence Brief from two weeks back, a country which seriously delays on commercialising 5G could theoretically miss out on the innovations 5G networks and capabilities help to incubate. The question we posed, then, was how long of a lag would be too long?

Good news: we have an example to look at.

Similar to aspirations around 5G, 4G has been hailed as responsible for enabling a wide array of digital innovations – everything from video everywhere business models, to pervasive IoT and the sharing economy. And while, circa 2018, we might take solid LTE coverage for granted across most developed markets, it obviously didn’t get rolled out simultaneously across the globe. China, for example, might be today’s leading 4G market by subscribers, but it wasn’t always this way. So, when discussions around a Race to 5G between the US and China are invoked, it seems like looking at the history of 4G rollouts in each is a worthwhile exercise.

We all know China lagged in the race to 4G, but by how much?

[3]

[4]

Let’s look at this along two different dimensions: total LTE connections and share of connections on LTE.

China didn’t start ramping its LTE uptake until about the start of 2014 (see top chart, click to enlarge). It didn’t take long for China to reach about the same base of LTE connections as in the US (Q1 2015), but that was still four years after LTE rollouts and connection uptake began in the US.

And on the share of connections front? You could argue that this is the more important metric.

Where total LTE connections might signal the scale (and scale efficiency) opportunity, share of connections on LTE point to the technology’s reach within the market – the opportunity for LTE-driven innovations to touch people. Here, we could look at a few milestones. China reached the 25 per cent penetration mark in Q3 2015, about two years after the US (see bottom chart, click to enlarge). The 50 per cent penetration mark was hit in Q3 2016, a year after the US. But if we’re talking about a race, then the important milestone is when China caught the US, right? That would be sometime between Q3 and Q4 of 2017, more than six years after US consumers began experiencing LTE.

Clearly there was a massive lag in the Race to 4G between the US and China. And what have been the results?

Today, China maintains two of the top LTE networking infrastructure vendors. It remains a major LTE smartphone market for vendors from around the world, while generating its own top-tier smartphone makers. It’s executed on new LTE technology innovations like NB-IoT and leveraged LTE to power new business models innovations (for example, the on-demand pushbike rental craze). Ultimately, it would be hard to argue that the lag in getting LTE commercialised in China irreparably harmed the country.

That doesn’t mean there isn’t a feeling that 5G will be different, that nobody can afford to be late to the game. Because of how 5G will open up new enterprise business models. Because of how 5G will allow service providers to benefit from two-sided business models like never before – potentially on a global scale. Because of the way in which 5G is so intricately linked to massive technological movements like artificial intelligence, IoT and mass digitalisation. Because of the hope 5G can help establish competitive advantages if regulation can deliver support, not obstacles.

Hope, of course, springs eternal, no matter what past experience suggests. In this case, however, if 5G truly is a race between nations, history suggests it is much more akin to an ultra-marathon than a sprint.

 – 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/blog/intelligence-brief-the-importance-of-handicapping-the-race-to-5g/
[2] https://www.mobileworldlive.com/featured-content/home-banner/t-mobile-to-lead-combined-co-in-sprint-merger/
[3] https://www.mobileworldlive.com/wp-content/uploads/2018/05/gsma1.jpg
[4] https://www.mobileworldlive.com/wp-content/uploads/2018/05/gsma2.jpg