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The deployment of 5G antennas accelerates in Europe, but not its use

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The deployment of 5G antennas in Europe has accelerated remarkably in recent months and is being much faster than initially occurred with 4G networks a decade ago. The main problem with the expansion of 5G is not so much its poor coverage in many areas, but rather that a large part of European users are already satisfied with their 4G mobiles and with their fixed broadband connections and do not see the need to switch to 5G. In addition, the current connection rates to fixed and mobile services remain at a relatively competitive price in Europe, due to the strong competition between operators, which hinders the profitability of the new investments in 5G networks that European operators are making.

 

If we take France as an example, which only a year ago was awarded 5G licenses, for an amount of 2,800 million euros, the four operators have already installed a total of 17,000 5G antennas this September, compared to the 8,000 there were at the end of last year. It took four years for the 4G antennas, started to roll out in 2012, to reach the current level of 5G.

 

Orange claims that it already covers 30% of the French territory and its competitor Free claims to have “the most extensive 5G network in France” that covers almost two thirds of the population (although 90% of its 5G antennas operate at 700 MHz, considered by its competitors as a “fake 5G”). Bouygues Télécom, another operator, plans to cover 60% of the French population by the end of the year. In any case, the “Mon réseu mobile” site of Arcep, the French regulatory body, confirms that Orange has 1,597 “true 5G” antennas, at 3.5 GHz, compared to 1,297 for Free, 1,010 for Bougues Télécom and 1,055 from SFR.

The main problem for the widespread use of 5G networks, especially in Spain, is that they already have fiber infrastructures and 4G services that are more than acceptable and at a good price due to intense competition

Arcep maintains that almost all of the 5G antennas have been authorized to place them in the sites that are already used in 2G, 3G and 4G. Even the mayors of Grenoble, Nantes, Paris and Lille, in mid-July, have ended up giving in and letting them install. Only a few cities are against 5G, such as Clermont-Ferrand, Tours, Lens or Saint-Étienne, with a Numantine defense against radio technology that they consider “invasive”.

 

5G coverage, however, is very uneven depending on the territory and also goes by neighborhoods and zones, even in large urban areas; and in rural areas there is hardly any coverage outside the important communication lines. In the 5G auction a year ago, delayed by the pandemic and the lack of spectrum, the objective was to have two thirds of the population covered with 5G networks by 2025 and the entire country by 2030.

 

The problem for French operators, as in general for all European operators, is that the new 5G networks installed do not support more than 1% of the country’s total mobile traffic, and that the additional cost is not very high. In France, a 5G subscription costs, on average, five euros more per month than an equivalent 4G.

Affordable mobile connection

Stéphane Richard, CEO and president of Orange, assured in Journal de Dimanche on the 12th that connection prices in the United States are 2.5 to three times higher than those of their European counterparts, which makes the three American operators are profitable. And he added with some sarcasm that “a monthly subscription to the Internet in France today costs less than a single paid parking day in Paris.”

 

Apart from the cost of the connection, it must be taken into account that, to use 5G, you must have a compatible terminal. In recent months, it is true that 5G smartphones have fallen drastically in price compared to equivalent 4G models and will do so even more around Christmas. Arcep estimates that, on average, the average life of a mobile phone in France is two and a half years, so renewal will take time. Richard Veil, president of Bouygues Telecom, “estimates that 12 to 13% of his customers have a 5G smartphone, but its use is still marginal, since it barely represents 1% of total traffic,” according to Le Figaro.

 

The bottom line, both in France and in the other European markets, is that consumers are not quite seeing the benefits of using the new mobile technology. When people started talking about 5G, it was said that 5G would go ten times faster than 4G, when the reality is that the difference in speed between the two mobile generations, even with good coverage and at high frequency, is now barely noticeable.

 

The speed of 4G, since the talk of 5G began, has progressed a lot, as 5G will surely do by 2025. But, at the moment, operators do not know how to convince consumers of the usefulness of 5G, be it because of the lack of coverage or the little difference in speed. We will have to wait at least a couple of years, experts think, so that with greater coverage and the use of fully 5G networks, with 5G SA, the difference will be noticed. In business, the same thing happens; applications will take time to get ready.

 

The problem, however, is not exclusive to 5G, because all mobile generations have needed several years to prevail. In reality, its advocates note, 5G penetration is progressing much faster than it was with 4G or 3G, and consumers have been able to purchase fully commercial 5G smartphones at a reasonable price earlier than with other mobile generations. It is true, however, that 4G or 3G were more useful than their 5G predecessors.

Layoffs in Spain

In Spain, the 5G situation is even more complicated than in France, it is more difficult to “sell”, because broadband networks are much more widespread than in other European countries, thanks to the fact that it has a high-speed Internet connection and 4G speed and coverage highly satisfactory for most consumers. With the pandemic, on top of that, consumers move less and mobile phones are used mostly from home or work, next to a fixed Internet connection.

 

The price of convergent connections, with Internet, landline and 4G mobile phones (in some cases with unlimited calls and even 5G) is also one of the lowest in Europe in Spain, due to the intense trade war waged by the three large operators with their own mobile network, with their own and secondary brands, and the multitude of virtual mobile operators and brands that exist, especially MásMóvil, which has recently taken over the Euskaltel network.

 

Last week, Vodafone Spain announced its willingness to reduce 12% of the workforce, which would affect about 515 jobs, most of them in the commercial area. In the last fiscal year, ended March 31, Vodafone Spain had 4,257 employees, 59 fewer than a year earlier and 900 fewer than in fiscal 2019. Vodafone’s job cuts have also affected the United Kingdom and Italy, and at group level, and has only grown in its German subsidiary. Vodafone employed 5,935 people in Spain in 2016 and their number has been reduced since then by around 1,700 people (not counting the adjustments of 1,059 employees in 2015 with the purchase of Ono and the 620 in 2013). From 2018 to 2020, both turnover and profits have dropped and the gross margin has gone from 28.5% to 23.5%.

The problem for European mobile operators is to convince consumers of the advantages that 5G technology offers, because most of them are already satisfied with the speed and good coverage that 4G offers.

Vodafone Spain boasts of operating a 5G network with the best features, with an average download speed of 322.81 megabits per second, as measured by Ookla and the second best latency in the Spanish market. This summer, its data traffic has grown by 30%, mainly thanks to video streaming and the greater influx of tourists. Subscribers to Vodafone convergent services can connect to 5G with no additional fee, but even so, the new mobile network is rarely used, both by Vodafone and Telefónica or Orange, although there is no data and the operators do not give estimates of its use ( which contributes to think that they are extremely low).

 

In any case, the high competition that exists in the Spanish market to provide mobile 4G or Internet services at good speed has been causing a price war for some time, which indirectly damages the acceptance of 5G and weighs on the results of the main operators, which also have to face investments in 5G and their coverage commitments.

 

Orange has also agreed this summer for the voluntary departure of 400 employees, of which 234 were early retirements, and Telefónica has just announced a major reorganization of its organizational structure, in addition to others carried out. In 2020, there was the first increase in the global workforce of the telecommunications sector in Spain since 2012, which will now change again with the announcements made by the Spanish subsidiaries of Orange and Vodafone. The arrival of 5G has coincided in Spain with a deterioration in the economic magnitudes of some of its operators.

German bet for more connection and speed

In Germany, significant investments are being made in the deployment of fiber and in 4G and 5G networks by the three main operators (Deutsche Telekom, Vodafone Germany and O2, a subsidiary of Telefónica). These investments are absolutely necessary because, paradoxical as it may seem, much of Germany suffers from outdated fixed telecommunications infrastructures and the 4G network also left something to be desired in many rural areas.

 

DT, the German dominant operator, has just sold its assets in the Dutch mobile network and its mobile phone business in the United States is profitable for it, so it can invest in the extension of its fiber optic network and its upgraded 4G networks to 5G in Germany, as the other two operators are also doing, under pressure from their government, users and companies, to promote the use of digital technology in all areas.

 

In the United Kingdom, the situation of the big three operators is also complex, especially in the case of BT, the traditional dominant operator, due to the strong competition, especially from the new fiber and mobile operator formed by Virgin Media O2. The British Government has just unveiled a project to help operators share some public infrastructures, such as luminaires, traffic lights and surveillance cameras, for a more effective deployment of 5G antennas and thus accelerate their coverage. The lower deployment of fiber in Germany or Great Britain compared to Spain, or even France, can paradoxically make the migration to 5G much faster.