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5G is proving itself as a massive driver of new revenues

By July 10, 2019 No Comments

Significantly more revenue seemed like an impossible dream for some service providers as little as 12 months ago. Barely 6 months on, since the last awkward mix of hype and cynicism at Mobile World Congress in late February, and the first numbers seem to be pretty astounding.

SK Telecom in Korea had been anticipating perhaps 200 thousand 5G subs in 2019, but reached over 1 million by early June, confirming that uptake there has been significantly faster than 4G. Data plans there are selling for $42 per month versus around $25 for 4G. That’s a 68% premium versus 4G that other service providers and investors will be considering closely.

Over in Italy, TIM has launched 5G and prices are starting at close to double its 4G blended ARPU (which, prior to 5G was approximately €16 per month). Existing customers there can also turn 5G “ON” for €10 / month. That’s over 62% above 4G blended ARPU, though presumably users would soon blow the roof off existing data allowances at advertised speeds of 2Gbit/s. Data volumes are set to explode further, since back over in Korea, average 5G users are consuming 1.3GB per day versus 400MB for 4G users.

Back in Europe, Vodafone UK has repeatedly highlighted there would be “no cost premium” (to consumers) for 5G, since it will benefit the operator from an efficiency perspective to move consumers onto the new network. This is a form of cost-based differentiation in addition to sharper convergence offerings that it is enabling via 5G to combat major rival, EE. It provides at least a basis for future, more differentiated 5G-enabled services and associated revenues in addition to cost savings.

Cost savings will only go so far. The major benefit of 5G is far more options for differentiation as the Italian and Korean providers are aggressively discovering and translating into dramatic new revenue. Both SK Telecom and TIM are doing much-anticipated bundling of 5G-enabled services, especially VR and AR. In Korea, they have added thousands of new content offerings. Added flexibility benefits, derived from 5G, will push down the cost per service launched. But the additional revenues per user provide phenomenal premiums over 4G if they can be extended over the majority of their subscriber bases.

A further example that gets us excited in Openet, as backed up by recent Capgemini research, is that significant numbers of large enterprises are so determined to access 5G that they are willing to consider building their own 5G networks rather than wait much longer for operators to provide dedicated service slices. Better news for telcos is that these enterprises are more willing to pay for such services more than the telcos themselves have been anticipating. The difference may be 15% greater than operators themselves had been hoping for. This translates to billions of dollars.

It appears certain that, by Mobile World Congress 2020, the most successful service providers are those most flexibly managing the massive array of new service options and revenue potential that 5G is already opening up. The 5G shakeout has started.


For the latest industry insights and white papers head to: Openet Industry Insights.