The rollout of 5G networks across the Asia-Pacific region (APAC) has been largely uneven. While some countries, such as South Korea, Taiwan, Japan and China, seem to be ahead with their 5G rollouts, others, including India, Indonesia, Pakistan and Vietnam, appear to lag behind.
For the region as a whole, just 47.4% of APAC mobile operators surveyed in the Kagan 2022 B2B Global 5G survey said they have deployed 5G. This number is markedly lower than in North America, Europe and the Middle East, and mostly due to 5G follower markets outnumbering 5G leader markets in the region. The latest 5G tracker from S&P Global Market Intelligence indicates that, as of August 2022, 46 operators in 19 Asia-Pacific markets have launched commercial 5G services.
“Unlike in Europe, where the European Commission has been instrumental in coordinating 5G launches among European markets, no centralised initiative existed for APAC,” says Julber Osio, research analyst at Kagan, a media research group within the telecommunications, media and technology offering of S&P Global Market Intelligence.
APAC’s leaders in 5G, such as South Korea, Australia and mainland China, were among the first in the world to launch commercial 5G services. In fact, South Korea deployed the first 5G network, and is expected to stay in the lead as far as penetration of the technology goes. According to Statista, by 2025 almost 60% of mobile subscriptions in South Korea will be for 5G networks. However, Osio says that there are also 5G “followers” within APAC – countries like India, Indonesia and Malaysia – so rollout in the region is “really a mixed bag”.
The analyst adds that there has been a recent “explosion” of mobile data consumption in APAC markets that has helped boost 4G penetration, but he believes that 5G is still in its infancy and the primary use case operators can offer is enhanced mobile broadband (eMBB).
“To many mobile users in APAC, current 5G is just faster 4G, and this does not give much incentive to jump to the new technology,” he says.
Osio adds that the availability of cheap handsets has been a major deciding factor in the adoption of 4G, and this is also true for 5G. Existing 4G handsets may not support the spectrum frequency bands 5G uses, but as many consumers in APAC find new 5G-capable handsets to be expensive, Osio says buying them is “a friction to faster adoption of consumer 5G”.
This, he adds, is why operators are focusing on enterprise 5G: compared to consumer 5G, it seems to provide more monetisation opportunities.
5G monetisation
Markets with significant manufacturing sectors, such as mainland China and Japan, have taken the enterprise 5G route by giving private 5G licences in dedicated spectrum frequencies to industry verticals.
According to Mei Lee Quah, director for ICT research at Frost & Sullivan, 5G monetisation is the “telecoms industry’s biggest bottleneck” and contributes to delays in the implementation of 5G technology.
Quah says that while the rollout of 5G in Asia is very much underway, the implementation of 5G enablers, such as 5G standalone (5G SA), 5G network slicing and cloud, seem to have been delayed. This is partly down to the Covid-19 pandemic, but mostly because the applications that will thrive on these emerging technologies implemented with 5G have not yet arrived in numbers that can make a difference.
“With the current state of the industry, mobile operators do not see the ruse or push to expedite 5G rollouts and advance to 5G SA,” Quah says.
Quah adds that the industry is buzzing with strategic partnerships and is waiting for the transformational power of 5G to unleash the innovation that will result in a host of new business models rising.
Interestingly, Osio notes that Kagan’s 2022 survey suggested that APAC’s operators were the most resilient when it came to the pandemic’s impact on 5G deployment.
“While the majority of North American, European and Middle Eastern mobile operators said the pandemic had slowed down their 5G deployment, only 36.8% of APAC operators said the same,” he says.
In fact, 31.6% of APAC operators said the pandemic accelerated their 5G deployment – the highest among all regions. Osio says an example of this is Japan, which moved up its commercial 5G launch from July 2020, for the Tokyo Olympics, to March 2020.
Tower deals
S&P Global estimates that the number of towers and small cells in APAC grew by 5.1% in 2021 to 5.79 million from 5.51 million in the previous year. After a slowdown in 2020, towers and small cells in the region experienced faster growth in 2021. Despite this recovery, rising inflation could drag out deployment during the next few years.
Telcos in Southeast Asia will likely step up tower sales in order to pay for 5G upgrades and make further technology investments as the sector settles down after a wave of operator mergers, according to an S&P Global Market Intelligence report published earlier this year. This does not apply to APAC as a whole, but only to South-east Asia due to the fragmented nature of the tower industry in its markets and unfavourable market conditions caused about by inflation and contractionary monetary policies.
“In other markets, like mainland China, most towers have already been consolidated into a single tower company, such as China Tower, while in other markets, like Japan and South Korea, towers are owned and operated by mobile operators themselves,” Osio says. “This isn’t the case in Southeast Asia, where mobile operators and tower companies compete for towers.”
These challenges have come at an inopportune time, as many operators in APAC are deploying 5G mobile services.
Despite this, the rest of East Asia had the highest share of APAC’s towers and small cells in 2021 – 39.9% of total towers. The ‘Greater China’ area alone, which comprises of mainland China, the Hong Kong and Macao special administrative regions, and Taiwan comes close at 39.4%.
Looking at market level counts, though, mainland China was still the top market with 2.1 million towers, followed by South Korea with 1.5 million, Japan with 800,000, India with 700,000, and Indonesia with 100,000.
Transition
Markets that have embraced the use of higher frequency millimetre wave spectrum for 5G have also been grappling with the increased operating costs for towers, Osio notes.
“South Korea and Japan have resorted to regulator-endorsed infrastructure sharing among operators to save on costs,” he says.
APAC’s markets are therefore transitioning from operator-captive to tower-company-led tower industries.
Osio believes the reasons for this can be regulator-driven, as in Bangladesh and the Philippines, or market-driven, as in Malaysia and Indonesia.
Given the economic environment, Osio says streamlining operations by selling infrastructure to tower companies and using the revenue to focus on core competencies would be a wise strategy for mobile operators. He adds that mobile operators should let tower companies focus on building infrastructure simply because they are better at it.
“In fact, markets such as Bangladesh and the Philippines have recently shifted to a ‘common tower regime’, wherein tower companies would build towers they would lease to mobile operators, as opposed to mobile operators building their own towers, which is less efficient,” Osio says. “Either way, deals which involve mobile operators selling their tower companies would be win-win situations for both the mobile and tower industries.”
For the mobile industry, operators can focus more on their key competency – providing connectivity – while the tower industry gains more assets which improves their economies of scale.
Emergence
Quah says the power of technological convergence is starting to shine through as we emerge from the pandemic.
“5G is starting to show real benefit to enterprises when implemented together with network slicing, edge computing, AI and cloud capabilities,” she says. “This is the space where we’re expecting the next wave of growth within the telecoms industry to come from.”
While the industry is not there yet, Quah believes that many can already see how 5G could transform it: enabling mission-critical services that depend on real-time decision making, based on high resolution and responsiveness is one example.
Key sectors that are expected to benefit from 5G include manufacturing, healthcare, and transportation and logistics. Growth opportunities lie in the development of applications for these verticals, implementation of security measures, and expanding the ecosystem towards achievement of scale, Quah believes.
“Helping enterprises get their digital transformation programmes underway with industrial internet-of-things, IT-OT integration and the like, will eventually get them on the road towards 5G adoption,” says Quah.
