2020 was projected to be the year of fifth-generation cellular technology (5G) but not anymore.
Growth stagnation at a macro level and lockdowns due to Covid-19 pandemic in the Middle East are bound to have a causal effect on the demand and supply side, industry experts said.
Karim Yaici, Senior Analyst at Analysys Mason, told TechRadar Pro Middle East that consumer demand for 5G services was expected to be small in 2020 even before the Covid-19 outbreak but now the outlook is gloomier.
“We expect that the massive disruption to the supply chain will have an impact on the capex of operators looking to launch 5G in the Middle East this year. On the other hand, the large groups that have already commercialised 5G are likely to remain largely on track with their 5G rollout plans, albeit network deployments will take longer than normal,” he said.
Krishna Chinta, Program Manager for Telecommunications and IoT at International Data Corporation (IDC), said that the pandemic situation has posed new challenges for the telecom operators as the mobile and fixed traffic consumption patterns have altered in unprecedented ways and this will certainly influence telecom operators to bring about certain changes to their operations as well as their cost structures as long as the impact lasts for.
Moreover, he said that this could result in reprioritising their original 5G investment plans or rescheduling their 5G rollout roadmap.
In the short-term, he said that telecom operators, unequivocally, see the need to roll out 5G networks to tap into technology features such as network slicing and dynamic network capacity allocation offered by 5G to deal with a situation that the world is currently faced with.
Almost all the major telecom groups in the Middle East region have active 5G investment roadmaps; he said and added that 5G is a long-term investment priority for telecom operators as they are hoping to launch new use cases and business models.
May face supply chain issues
“As operators are making a significant amount of investments in 5G, long term return on investment will definitely continue to drive their strategic decisions. At the same time, they can't overlook the short-term market developments as they are required to take the necessary tactical measures,” Chinta said.
While it is too early to judge the impact of the pandemic on operators' capex propensity, he said that operators may be considering capex reprioritisation plans to deal with more immediate operational needs.
Additionally, despite strong interest, he said that operators will most likely face supply chain issues if the impact of pandemic lasts longer.
In the UAE, Expo 2020 was expected to reveal technological advancements and business use cases in 5G but it is postponed to next year due to the pandemic.
While a mega-event such as Dubai Expo has been postponed, it may not necessarily alter the 5G rollout plans given its long-term importance to the telecom operators, Chinta said.
Furthermore, he said the event alone cannot be an influencing factor when it comes to the operators' 5G investment plans.
“Both the telecom operators in UAE are among the early adopters of 5G technology in the region and they are determined to tap into the true business potential of the 5G technology. Although, there could be a shift in the operators' short-term capex priorities, in view of the current macroeconomic situation, but both the operators will continue to promise strong support to their long-term 5G investment plans,” he said.
Yaici said that operators should be realistic about the revenue potential of 5G, at least in the short term and added that operators should continue to improve the performance of their 4G networks while introducing exclusive content bundles to drive data usage and showcase 5Gs’ capabilities.
Moreover, he said that telecoms operators should start now forming partnerships to prepare for the new types of consumer 5G services, such as cloud gaming and VR, and explore new pricing models.
“Operators will also need to work closely with businesses and regulators to identify and explore more-radical commercial use cases that could benefit from 5G in the longer term such as industrial IoT,” Karim Yaici, Senior Analyst at Analysys Mason, said.
Close cooperation needed
According to market intelligence firm Omdia, the Middle East and Africa will see a 3.9% decline in mobile service revenues to $84b, representing a downgrade of 8.4% from its previous forecast.
Major factors for the decline include the impact of low oil prices on Gulf economies and the fragility of economies and health care systems in parts of Africa.
Worldwide, mobile communications services market revenue will fall by 4.1% year on year to $749.7b this year compared to $781.5b, down from the prior forecast of $800.3b.
“Operators will also need to work closely with businesses and regulators to identify and explore more-radical commercial use cases that could benefit from 5G in the longer term such as industrial IoT,” Yaici said.
If the pandemic situation improves relatively quickly in the Middle East region, Yaici said that then there is no need for the operators to significantly scale back on capex.
In the unlikely event that this crisis lasts much longer, he said then the financial priorities of the operators will tilt towards addressing critical short-term needs and delaying longer-term investment plans to ensure financial stability.
“Business telecoms will be hit harder than consumers because of the decrease in economic activity. Many firms will face serious financial difficulties and they will cut back on their spending on telecommunication services. These conditions will dampen the demand for the new 5G B2B services and will likely delay their commercialisation by a few months to a year,” he said.
Chinta said that the business community is embracing a variety of technologies such as cloud, AI, and RPA to digitise some of their enterprise workloads or as part of their digital transformation projects as some of these technologies require faster and more resilient connectivity.
“As operators are making a significant amount of investments in 5G, long term return on investment will definitely continue to drive their strategic decisions. At the same time, they can't overlook the short-term market developments as they are required to take the necessary tactical measures,” Krishna Chinta, Program Manager for Telecommunications and IoT at IDC.
New 5G standards to be released only in 2021
“A few IoT and IIoT use cases will also need massive machine type communication capabilities offered by 5G technology to mature and scale up rapidly. Although this scenario creates a perfect business case for 5G technology, a few enterprises are going ahead with the existing communication technologies such as 4.5G, 4.5G Pro, and fibre without necessarily waiting for 5G technology to fully evolve,” Chinta said.
Moreover, he said that the emergence of truly innovative enterprise 5G use cases will not take place until the availability of release 16 and 17 standards, which will bring about major improvements to the current 5G technology.
As release 17 standards are expected to be released only in 2021, he said the true innovation in 5G enabled enterprise use cases can't be expected before 2021.
It is undeniable that the telecoms industry played an important role during the pandemic in providing communications, video and cloud services despite the 20% to 70% increase in data traffic during daytime reported by telecoms operators worldwide.
“I think in most parts of the Gulf region, the fixed networks coped well in terms of capacity due to the broad access to fibre connectivity and the recent boost in download speeds. However, the end-user experience might have been affected because of the pressure on the home Wi-Fi network as more people connect in each household. I think there is an opportunity for operators to propose software and hardware solutions to address indoor Wi-Fi coverage issues,” Yaici said.
Niche near-term opportunities
Yaici said that operators, especially in this region, tend to focus on publicising some of the more radical 5G use cases but there are some niche near-term opportunities where the demand is more concrete and where the connectivity characteristics are the same in a 5G world as in the 4G world.
“Many niche use cases are not very interesting and receive less attention but they would benefit from the added bandwidth provided by 5G, such as connected CCTV. The longer-term opportunities for 5G, such as autonomous cars and industrial applications, will require wide geographical coverage, high-level of network resilience and domain expertise for the operators to successfully commercialise these solutions,” he said.
In countries where 5G deployments have already taken place, Chinta said the technology is demonstrating a strong ability to support mission-critical applications in the midst of Covid-19 situation.
“The technology is proving to be successful in crisis management and in areas such as telehealth, public safety, as well as to support home broadband users to enable remote working and remote learning. Thus, the 5G use cases that tried and tested in the current situation will find long-lasting relevance through unlocking the value offered by the technology itself,” he said.
Yaici said that 5G, by itself, will not be sufficient to address the underlying obstacles that have hindered the take-up of business services offered by operators so far, such as lack of awareness, the limited understanding of the potential of technology, and the immaturity of the ecosystem.
“There is a fair bit of work to be done to educate businesses about 5G and to experiment and test the radical use cases before they become ready for commercialisation,” he said.
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