Imperative to change financial strategy for 5G roll-out

UAE Business Magazine

–Amrit Heer, Head of Business Development – EME, Parallel Wireless

The buzz around 5G has now reached a high pitch with all global telecom players as well as telecom equipment manufacturers warming up for possible 2020 roll-out of the technology. The excitement around 5G launch becomes all the more palpable as one hears about the enormous possibilities of the new technology.

Telecom companies in developed parts of the world are now racing against each other to be the first one to launch commercial use of 5G even as others in emerging and poor parts of the world are beginning the tests and trials of this technology.

The UAE and other Gulf Cooperation Council (GCC) countries have already started to see 5G actions in a more advanced stage. While most regions of the world expect the 5G roll-out by 2020, GCC countries may see commercial launches in 2019 itself.

Etisalat, a telecom giant in the region, claims to have launched the first 5G wireless network in the UAE becoming the first telecom operator in the Middle East and North Africa (MENA) region to do so. AT&T in the US claims to have launched 5G services. It remains to be seen how authentic the claims of 5G services are since 5G standards are yet to be finalized.

Irrespective of the claims, it is unrealistic for anyone to hope that these early launches will realize the full potential of 5G overnight.

Changing strategy

There are already mind-numbing revenue estimates due to 5G in the next five-to-seven years. An Ericsson study suggests that revenue from 5G in the Middle East and Africa (MEA) region would be $242 billion by 2026, while other industry estimates suggest revenue in the GCC region alone would be $28 billion by 2023.

However, to achieve this kind of revenue, the telecom operators will have to undertake a large CAPEX. With already having invested billions in creating the existing 2G, 3G and 4G networks without making any significant profits, telecom operators need to adopt a new strategy to fund their 5G dreams.

The current layered approach of adding the next generation of mobile technology on top of the older generation technology, and then maintaining them all is no longer a cost-effective approach.

Despite all the excitement around 5G, it would take some time before it acquires a mass market. According to the GSMA mobile economy 2018 report, 5G would grab only 16% of the mobile market by 2025. By then, 4G would occupy 76% of the technology mix.

So any investment in 5G would have to be made keeping this reality in mind. Therefore, operators need technology that will maximize the value of their existing network assets and give them the capital for a cost-effective migration to 5G.

The ‘virtual’ foot forward

The key to cost-effectively expanding the 5G network is to devise a way to integrate it with the existing  2G, 3G and 4G infrastructure. This can be done by virtualizing the older generation networks – that is shifting them from a hardware-driven network to a software-based network.

A virtualized network is not only cost-effective, but it is also future ready. Virtualizing the older generations networks allows the operators to run 2G/3G/4G and 5G simultaneously on the same site. It also makes deployment of new generation technology on the existing infrastructure easier and simple, and at times without incurring additional cost.

This approach helps operators get the most out of their network assets and make future-proof their networks. In doing so, the telecom operators can drastically reduce operational costs.

Decoupling hardware and software services

Service providers, like Telefonica and Vodafone, have explored the new approach of disaggregating the hardware and software services to make the network more open, agile, easy to deploy and manage. More and more operators are now waking up to the need for software-based network solutions, which support all generations of mobile connectivity.

Further, the telecom operators are now opting for software solutions from a range of services providers who are offering best-in-class solutions instead of being obliged to buy software solutions from the hardware providers.

The revolution that the 5G technology promises to deliver would be a reality only when operators can reduce the operation cost of their older generation networks. With 3G and 4G likely to play first fiddle in the near- to mid-term, any serious investment in 5G network expansion has to come from savings made on the existing networks. Telecom operators, therefore, need to put their ‘virtualized’ foot forward to crack the 5G code.