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5G grows slower than expected, except in Asia

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Global subscriptions to 5G networks are growing at a good pace, higher than expected in early 2019, but this is due to the explosive growth in the last year and a half in China and South Korea, where they already have a penetration of more than 12% at present, while in Europe as a whole it is only 1% and in the United States and Canada 3%. Globally, the penetration of 5G networks is now in the order of 7%, according to data from the GSMA Mobile Economy 2021 just presented at the MWC, and by the end of 2025 it is expected to reach 21%, when Western Europe and the United States United begin to take a run from 2023.

The panorama of the mobile economy presented by the this year’s report from the GSMA is certainly promising globally, with significant growth through 2025 in mobile subscribers, which will rise from 5.2 billion today to 5.7 billion forecast for the middle of this decade. This will mean that by the end of 2025 the global mobile penetration rate will be 70%, compared to the current 67%, and with an annual growth of 1.8%. Which means an additional half a billion unique mobile subscriptions until the end of 2025.

The pace of 5G rollout in Europe in the next two years remains to be elucidated, because the 35% penetration figure predicted in the GSMA report is plausible.

Logically, with these high penetration figures, the rate of increase in mobile subscriptions has been slowing for some time, but even so, there is still a long way to go for mobile networks, both for 4G, which is expected to reach its maximum in 2023 with 60% of the total, as above all of the 5G. Naturally, 4G and 5G will grow mainly at the expense of 2G and 3G, which will decline at a relatively high rate while 5G networks grow in parallel.


Mobile Economy 2021, GSMA, June 2021

The top graph, taken from the GSMA report, shows the percentage of connections from the different types of mobile networks. The rise of 5G networks is remarkable, from zero until spring 2019 to 21% expected by the end of 2025 and 10% globally by the end of next year, compared to about 7% at the moment. As is clear from the graph, the bulk of global mobile connections are 4G, around 57%, and will still increase in the next two years, when the peak of 60% is reached, to progressively drop to 57% in 2025.

This current forecast that by the end of 2025 21% of all mobile connections will be able to be through 5G networks may seem modest, given how much has been said about 5G in recent years. However, if you look at the graph below, extracted from the GSMA report presented in February 2019, during the MWC of that year, it was expected that by the end of 2025 the total number of 5G connections would be 15%.


Mobile Economy 2019, GSMA Intelligence, Feb 2019

It is interesting to note that the forecast for 2G connections in 2025 is the same in 2019 and 2021, 5%, while a slightly higher number of 3G connections was calculated in 2019 than is now estimated. In the report presented last Monday, it is estimated that there will be the same percentage of 5G connections by the end of 2025 as the sum of 2G and 3G, when at the beginning of 2019 it was estimated that there would be 20% 3G, 15% 5G and 5% 2G (it is assumed that the calculation methodology of the GSMA analysts has not changed). As for the expected evolution of 4G, it remains essentially the same in percentage.

China distorts global calculations

The future evolution of the global penetration of the different generations of mobile networks has not changed much in these two long years that have passed since the last MWC, in 2019, and the reports presented by the GSMA. Moreover, the 5G network will penetrate faster than expected, but it will be global, because the data presented in the latest GSMA report shows that in Europe and the United States, 5G penetration is being much slower than expected and It will probably be in the next two years while in Asia, and especially in Southeast China, South Korea and perhaps Japan it will be much faster than estimated in 2019.

China has pulverized since September 2019, when it began to provide commercial 5G service, all the growth expectations of 5G networks in its territory and will continue to do so until at least 2025, thanks to strong government promotion, its immense population, the strength of its suppliers, especially Huawei but also ZTE, as well as the facilities given by the Government so that the three large operators had enough spectrum in the preferred 3.5 GHz band and encouraged to share networks and base stations.

China will have, by the end of 2025, half of all 5G networks and subscribers globally; now, 1% of networks in Europe are 5G and in the United States and Canada 3%, while in China the figure is 12%

The bottom table of this year’s GSMA report clearly shows China’s dominance in 5G in 2025. According to the global association of operators, by the end of 2025 there will be 828 million 5G connections in China, followed by 236 million in Europe and 219 million in the United States and Canada. In developed Asia Pacific, which includes Japan, South Korea, Singapore and Australia, there will be another 164 million 5G connections by the end of 2025. In the rest of Asia Pacific, with countries as populous as India, Indonesia, Thailand or Vietnam, another 202 million. China, as the title of the graph indicates, will account for about half of global 5G connections by the end of 2025. Or, in other words, there will be more 5G connections in China than in the entire United States, Europe, Japan, Korea. South and the rest of developed countries together.


Mobile Economy 2021, GSMA, June 2021

The graph is a bit confusing, because it highlights the strong growth in the pace of adoption of 5G networks until the end of 2025, with the developed Asia-Pacific countries and the United States and Canada in first place, with growth rates above 50% when Europe, with a growth of 35%, will have more 5G connections than the United States and Canada or Japan, South Korea and other large developed countries in the Pacific.

The apparent discrepancy in these figures is due, on the one hand, to the immensity of the current 5G market in China, which will continue to grow at a devilish rate (48%) while, for example, it is not expected to exist in Europe as a whole ( nor in Western Europe) a very high adoption of 5G networks in the next two years. On the contrary, it is expected that in the second half of this first half of the decade the pace of 5G adoption is already very high, until having, by the end of 2025, 236 million 5G connections, according to the report.

The upper graph breaks down the percentage of 5G, 4G, 3G and 2G networks that each region has now and that forecast for the end of 2025. The situation, in this way, is much more complete, because it can be seen that now, in China, 12% of all its networks are 5G and 82% 4G. In contrast, in Europe only 1% of networks are 5G and 69% 4G. In the United States and Canada, 5G represents 3% and 4G 85%. 5G networks in Asia Pacific account for 1%, although if developed Asia Pacific had been broken down as before (with South Korea and Japan) the percentage would probably be triple or more, as well as if Western Europe had been broken down.

By the end of 2025, half of the networks in the United States and Canada will be 5G (51%), similar to China (48%), based on GSMA calculations (highly respected, because they have reliable data because the association brings together the vast majority of operators from all over the world). In China, 2G and 3G will have completely disappeared by the end of 2025 (they only have 6% of the total now) and in the United States and Canada almost (only 5% of the total will remain, compared to the current 12% 2G and 3G).

Europe, uncertain takeoff of 5G in the short term

In Europe, as it was the region that had a strong deployment of mobile telephony two decades ago, the presence of 2G and 3G networks is much higher now (20% of the total is 3G and 10% 2G). The GSMA forecast is that 2G and 3G networks will be a very minority in Europe by the end of 2025, 6% of the total. The GSMA estimates that most of the 2G and 3G networks currently in existence in Europe will become 4G (from 30% to 6%) and about 34% of the current 4G will migrate to 5G. Thus, in Europe as a whole, 59% of all networks will be 4G and 35% 4G (in Western Europe, obviously, the percentage of 5G networks will be much higher).

European operators have a strong incentive to migrate the vast majority of current 2G and 3G networks to 4G, because they consume much more energy and the operating cost is much higher per data or call. However, the shutdown of 2G should be gradual, because there are still many basic services and simple terminals in operation, as with 3G. It is likely that the move to smartphones will be subsidized to be able to switch off 2G and 3G without problems. Another additional advantage would be that the antennas would be freer, since now the 2G and 3G occupy the best places on the mast (because they were the first to arrive). Removing old systems, however, is not a trivial task. Think of what it has cost to remove DTT from the 700 MHz band to make way for the 5G spectrum.

The global mobile telephony market faces a great evolutionary process in the coming years, derived from the progressive introduction of 5G and the disappearance of 2G and 3G over 4G. What remains to be elucidated is when and at what rate the deployment of 5G will occur in each of the markets. The GSMA report does not break down the situation of networks and their subscribers at an intermediate point, in mid-2023. Although the situation at the end of 2025 is as predicted by the report at the global level and by regions, it is clear that the The rate of penetration of 5G networks and subscribers will not have a constant slope, much less by region.

The evolution of 5G until 2025 in China is quite predictable and will be very fast, as well as in South Korea, because much of the journey has already been done and large investments are planned for this year and the following. In the United States, on the other hand, until 2023 there will not be a big take-off of 5G in the best of cases, because there will be no spectrum available at medium frequencies until then (although 5G at low band). In Japan we will see, although the Government is determined to promote 5G to benefit the development of the digital economy.

The main question is what will happen in Europe from the middle of next year, if there will be a big push for 5G or will we wait for a large commercial application to facilitate the massive adoption of 5G by users. For now, it is clear that a large part of the smartphones that will be sold from next year will be 5G (if the supply of components is normalized and prices continue to fall).

But that 5G smartphones are sold does not mean that they are used like 5G: apart from having them, you need coverage to make them work like 5G. The highly competitive situation of the mobile market in Europe, together with how the pandemic remains in autumn with the Delta variant, makes making medium-term forecasts (one to two years) very risky and much more difficult to get them right.