5G is entering the third year of an anticipated 10- to 15-year technology cycle with the wind in its sails, according to a study conducted by Bloomberg Intelligence (BI). As 5G plays an ever more influential role in communications, the survey reveals growing optimism within the investment community about the technology’s potential, with a consensus forming around a 5 per cent-10 per cent incremental contribution to the industry sales pool over the next five years.
Data published at the end of last year reveals that 412 carriers in 131 countries are now investing in 5G, with 135 carriers across 58 countries having launched standards-compliant services (126 mobile and 48 fixed-wireless access services). However, compared to 806 live 4G (LTE) networks, there is still a long way to go – and only a few carriers have started upgrading to the standalone radio and core-network technology needed to unlock 5G’s full potential.
Matthew Bloxham, Senior Industry Analyst for Telecom, Media and Internet at Bloomberg Intelligence, commented: “It has been a good time to poll the investment community’s views on 5G given the ramp up of commercial deployments around the world over the last year, aided by the bump to momentum from the launch of Apple’s iPhone 12. Our research shows that not only is there is growing optimism for the application of 5G among investors, but also that it is playing a gradually more important role in the investment screening process than ever before.”
When asked about the role 5G played in their investment screening process, 70 per cent of respondents claimed that it was important – slightly lower than in 2020 (75 per cent). However, the proportion who said that it played a ‘very important’ role in their decisions rose significantly, from 20 per cent in 2020 to 32 per cent this year. Given 5G’s potential to create new markets and help companies expand by leapfrogging their rivals, this is no surprise.
As well as playing a more significant role in the investment screening process, the research also reveals a growing sense of optimism about 5G’s potential. More than two fifths (43 per cent) of respondents stated that they were more optimistic about the 5G value-creation opportunity than at the same point last year, compared to just 12 per cent who said that they were more pessimistic. This is the third year in a row that optimism from investors has been growing from 36 per cent in 2019 and 39 per cent in 2020. The positive momentum may reflect the progress made on real-world deployments over the last 12 months, with new data points from carriers and technology suppliers helping to ease concerns and reveal 5G’s potential.
Despite this, expectations for a 5G-led revenue boost are still muted, despite the positive shift in sentiment expressed by investors. The majority of respondents (73 per cent) expect a cumulative positive impact of less than 10 per cent on the industry revenue pool over the next five years – a small increase on the 2020 survey (69 per cent). Opinion appears to be gravitating towards a 5 per cent-10 per cent expansion (selected by 41 per cent of respondents), which implies 1 per cent-2 per cent annual incremental growth from 5T, which is consistent with the expectations of some carriers, such as Finland’s Elisa.
While faster and pricier consumer mobile subscriptions may be driving 5G’s early momentum, BI’s survey reveals that the most potential for its application can be found in enterprise and industrial-use cases that tap into its technological advances over previous standards. Massive machine-type communication capabilities, such as the Internet-of-Things (39 per cent), and ultra-reliable low-latency connectivity (36 per cent) were cited as the most attractive applications by respondents, ahead of enhanced mobile broadband (25 per cent). This technology may be key to unlocking much-hyped 5G uses such as smart cities, manufacturing and agriculture, intelligent energy grids and autonomous transport networks. The shift toward a carbon-neutral economy may fuel demand for these applications, but they’ll need carriers to upgrade core networks and build more cell sites in order to achieve this.
The biggest anticipated roadblock for 5G remains the development of attractive, real-world use cases, as stated by nearly half (45 per cent) of respondents. This isn’t a huge surprise given the limited progress made so far monetizing anything other than subscriptions for faster mobile-handset connections.
Bloxham concluded: “Perceptions may remain muted until network capabilities are upgraded, and industrial applications are generating sales. Public policy concerns are still high, particularly when it comes to local planning approvals that will be needed to increase network density, install edge-computing capability and deploy smart sensors to buildings and infrastructure. However, overall the findings of this research are largely positive, and will no doubt give investors much to consider.”