Friday, April 10, 2020
Mobile Carriers in Dilemma over Investment in 5G
5G Dilemma
Mobile Carriers in Dilemma over Investment in 5G
  • By Cho Jin-young
  • February 13, 2017, 01:45
Share articles

Mobile carriers these days cannot be sure about whether they will be able to recover their investment after the early commercialization requiring a huge investment.
Mobile carriers these days cannot be sure about whether they will be able to recover their investment after the early commercialization requiring a huge investment.

 

These days, one of the most important keywords of the global economy is the fourth industrial revolution. Under the circumstances, earlier commercialization of 5G technology by global mobile carriers is being called for to accelerate the innovation of industries such as manufacturing, distribution and medical.

This is a dilemma on the part of the mobile carriers because their sales growth in the mobile industry is currently stagnant and the period given for them to recover their investment in each generation of technology from 2G to 4G has shortened due to the increasingly rapid development of mobile technology. Nowadays, they do not have enough resources to invest in 5G and they cannot be sure about whether they will be able to recover their investment after the early commercialization requiring a huge investment.

According to industry sources, telecom operators in various countries around the world are working on 5G technology to take the lead in the industry with the 3rd Generation Partnership Project (3GPP) preparing international 5G standards so that trial and commercial services can be provided in 2018 and 2020, respectively. At present, those companies’ race is covering not just 5G speed but also related industrial elements such as connected self-driving cars, virtual reality (VR) media and smart factories based on the Internet of Things (IoT) to be provided in the framework of ultra-high speed and ultra-low latency 5G networks. Experts point out it is information and communications technology (ICT) infrastructure that will determine the success and failure of each of the operators in the end.

Unlike the fruit of 5G infrastructure expansion, which will spread to cover the public sector as well as the automobile and media industries, investment for the purpose is to be borne by mobile carriers alone. This is the reason for their dilemma. During the commercialization of LTE between late 2011 and 2012, KT, SK Telecom and LG U+ made an investment of no less than 15.5 trillion won in total.

Last year, the three companies’ annual sales totaled 22.7437 trillion won, 17.0918 trillion won and 11.451 trillion won, respectively. Their sales from wireless communications services were stagnant for the third consecutive year. Specifically, the figure fell 1.6% year on year in the case of SK Telecom and edged up 0.6% and 2.1% for KT and LG U+.

Besides, the service life of their mobile business model is increasingly shortened from generation to generation. For example, their 1G services had been their main business model for 12 years but 2G kept that position for only six years. 3G was replaced with 4G in five years and 5G is about to take its place next year. This trend means less and less room for investment in that the companies tend to recover their investment by means of phone bills while maintaining their services for at least 10 years after a massive initial investment.

In this regard, industry experts across the world are calling for governments to review their telecom industry policy focusing on regulations to compel telecom operators to build and upgrade national information infrastructure in return for entry barriers. The Global System for Mobile Association (GSMA) is one of the organizations advocating such a change in paradigm, that is, deregulation and an expansion of the scope of the telecom industry in step with national information infrastructure establishment and management.