5G Vitality Set to Strengthen as Market Growth Exceeds Expectations

Those networks have grown at an impressive rate. More than 1.5 million 5G base stations have been deployed in the last two years, with over one million of these in China. Few operators globally have moved at the pace of the Chinese, but there are a growing number of operators who have built out 5G to more than half of the population in their market. By the end of 2021, Strategy Analytics forecasts that 2.3 billion people will be covered by at least one commercial 5G network, 29% of the world's population. As with the network launches, this rate of coverage growth is more than 2x that seen with 4G LTE. We forecast that 5G networks will cover two-thirds of the world's population by the end of 2026.

While the rate of 5G network expansion has been encouraging, Strategy Analytics has been impressed with the momentum building behind Standalone 5G in 2021. Again, the GSA has counted 19 operators in 15 countries who have launched public 5G Standalone networks by October 2021.

As you would expect with these deployment trends, 5G subscriber growth has also been strong and significantly outperformed 4G. The number of 5G subscriptions globally increased from 510 million at the end of June 2021 to 640 million in September, a level that it took 4G over five years to reach. According to our device technologies team, 425 million 5G phones were shipped in the first nine months of 2021, 3x above 2020 levels, and they forecast that 60% of smartphones sold in 2022 and 77% sold in 2026 will support 5G. Very early in the 5G technology cycle there is already 'something for everyone' in the smartphone market, with Apple dominating the high end and a growing number of (Chinese) vendors producing sub-$200 models for a global audience. While there has been healthy growth in FWA services and emerging enterprise applications, 5G phones are accounting for the bulk of 5G volumes today.

At Huawei's recent Mobile Broadband Forum in Dubai, operators and industry bodies spoke clearly about the benefits they see 5G bringing to their business, to customers and to society. At a high level, the GSMA reiterated its call to the industry "to unlock the full power of connectivity so that people, industry, and society thrive", emphasizing the upside for 5G operators in value generation and in contributing to society by connecting the unconnected, unlocking economic growth and enabling carbon emission reductions. The SAMENA Telecommunications Council built on this message by highlighting the contribution 5G is making in the Middle East with the growth in 5G utilization in the healthcare vertical, a sector that has seen rapid digitalization as part of the COVID-19 response, and in the oil and gas industries.

One area where 5G has made a positive contribution to the COVID-19 response has been in the deployment of 5G FWA services to support the significant changes in working patterns and education. Zain's operations in Saudi Arabia and Kuwait have seen an encouraging performance boost from promotion of 5G FWA services, with revenue and profitability improving as it has focused on high-coverage, high-performance 5G for broadband connectivity. Zain has 450,000 5G FWA connections and 15,000 5G leased line connections delivering an ARPU of US$70 (versus a mobile ARPU of US$26 in Kuwait and US$20 in Saudi Arabia). 5G already accounts for 40% of traffic for Zain in Kuwait.

Zain is one of a number of Middle East operators enjoying early success with 5G. As the region leads globally in 5G FWA deployments it is also seeing healthy adoption of 5G smartphones supported by strong network footprints. For example, in the UAE, du has over 10% of its subscribers on 5G (on a network covering 90% of the population), with smartphone adoption complementing the role of FWA as a mainstream revenue source for the operator.

Alongside these successes in the Middle East, we often talk about successful 5G developments in China, South Korea, and the US, where 5G accounted for 27%, 26% and 17% of subscriptions respectively at the end of September. It is worth also looking to emerging markets to see 5G growth already happening. In the Philippines, both Globe and Smart have built good 5G FWA businesses and 5G mobile B2C adoption is also starting to develop, with over 1.8 million 5G connections in that market (albeit just 1.2% of the total). While in Thailand, AIS had 1.6 million 5G handsets on its network delivering 1.5 million '5G package subscriptions', equivalent to 4.3% of its total customer base or 13% of its postpaid base. AIS's 5G network covers 42% of Thailand's population (90% of the capital region) and 5G phone prices start at low as US$45 on a US$30 service plan contract. It's 5G ARPU is over US$18, offering a 10-15% uplift over postpaid ARPUs, with good gains made in its postpaid market share in 2021.

The speed with which developing nations have entered the 5G market (embracing the economies of scale unlocked in China) sets it apart from the early days of 4G dominated by developed markets. The scale of 5G today, on most measures 2-3 times the size of the 4G market at the same time in its lifecycle, is impressive and significantly exceeds the expectations as the technology came to market in 2018 and 2019. There is still much work for operators to do to support the 5G application and services ecosystem and deliver on its promise, but the foundations are very much in place.