Our top 10 headlines in another busy year for operators
There’s no doubt that 2020 has been another frantic year in the telecom world. The pandemic, of course, has sparked new strategies and customer behaviours that couldn’t have been expected. But Covid-19 was far from the only story: open radio access network technology (or Open RAN), 5G and mergers and acquisitions were at the forefront of many discussions; Rakuten and T-Mobile US grabbed endless headlines; and partnerships between network operators and cloud providers were all the rage.
So, in no real order, here are my top 10 stories of the past 12 months.
Rakuten’s hotly anticipated launch. Few network launches have generated as much publicity as Rakuten did when it debuted its fully virtualized 4G RAN in April (see Insight Report: Rakuten Could Form a Template for Future Mobile Launches). The Japanese operator followed up with the launch of a 5G network less than six months later. In 2021, 5G in Japan could garner even more attention at the Tokyo Olympic Games. Seeking to quickly win customers in a market characterized by high prices, Rakuten has heavily undercut rival Japanese operators. But the most interesting part of its strategy could be its plans to commercialize different aspects of the mobile package by making them available to other operators.
Telecom operators and cloud providers cosy up. This year saw a deluge of partnerships between network operators and hyperscale cloud providers, many aimed at bringing cloud computing capabilities to the network edge to help unlock some of the potential of 5G. These agreements can help develop new applications, such as those that need significantly reduced latency, and bolster processing power and analytics capabilities for industrial processes. Among the latest announcements, KDDI, SK Telecom, Verizon and Vodafone showed good progress deploying Amazon’s Wavelength-based edge computing service (see Event Report: Amazon Web Services re:Invent 2020).
Microsoft’s acquisitions of Affirmed Networks and Metaswitch in the spring surprised many as the US company sought to dramatically gain telecom expertise and acquire ready-made operator relationships (see Insight Report: Hyperscale Cloud Providers Accelerate the 5G Edge). Watch out for further examples of tech companies muscling in on telecom territory in 2021.
Open RAN rivals 5G for hype. Noise about Open RAN ratcheted up several levels this year as the industry sought to lower its reliance on a very small number of traditional infrastructure suppliers. Growing restrictions placed on Huawei only added to the fervour. Questions remain about what impact Open RAN will eventually have, but the level of enthusiasm from many operators — and now even some governments — is undeniable (see Insight Report: The Open RAN Journey). Vodafone is among the most bullish operators about opportunities in Open RAN and said recently that it plans to deploy the technology at 2,600 sites in the UK by 2027.
Mergers and acquisitions firmly on the table. Several important deals were announced this year, as operators continued to look to acquire, merge or divest. In the UK, after years of courting with Vodafone, Virgin Media decided to tie the knot with O2 in a deal that should complete in the middle of 2021 (see Instant Insight: O2 and Virgin Media Agree £31 Billion Merger). Elsewhere, Brazilian mobile operator Oi was acquired by a consortium made up of Telecom Italia, Telefonica and America Movil; Liberty Global bought Swiss operator Sunrise; Iliad swooped for Polish operator Play (see Iliad’s Polish Play) and Verizon acquired Tracfone.
With telecom networks now considered a critical part of national infrastructure, I’ve frequently argued that European regulators may start to temper draconian attitudes toward consolidation. Combined with the landmark court ruling this year that annulled the 2016 decision to block Three’s acquisition of O2 in the UK, I expect European mobile operators to pursue opportunities with more confidence in 2021.
China flexes its 5G muscle. As predicted by CCS Insight, China quickly became the largest market based on 5G customers this year. Demand has been lifted by the emergence of low-priced 5G devices, combined with rapid network roll-out and strong operator promotions. Market leader China Mobile already had 80 million subscribers using a 5G mobile phone at the end of September. Our latest forecast sees China surpassing 400 million 5G connections in 2021, before hitting 1.6 billion in 2025, equivalent to more than four in 10 worldwide (see Market Forecast: 5G Connections, Worldwide, 2020-2025).
Operators respond admirably to the Covid-19 challenge. Fears that networks may buckle under soaring demand were quickly dispelled as fixed-line and mobile infrastructure stood firm during the pandemic. But operators’ contributions went far beyond supporting customers: some quickly moved to offer connectivity at new hospitals, bolster coverage for the emergency services or assist governments in their efforts to track the spread of the virus (see The Long-Term Impact of Covid-19 on Telecom Operators). Their brands have enjoyed a welcome reputational boost this year, with many reporting record-levels of loyalty and higher customer satisfaction. Now, they need to move swiftly and cleverly to capitalize on their stellar efforts (see The Covid-19 Opportunity for Operators).
Operators seek to cash in on passive infrastructure. Monetizing network assets was another trend of 2020 (see Insight Report: Monetizing Mobile Towers Can Help Operators Fund 5G Expansion). Spanish company Cellnex continued its spending spree this year, recently securing 24,600 telecom towers and sites from CK Hutchison for €10 billion, its biggest deal to date. And in November, Vodafone said that its towers unit Vantage Towers will have a €1 billion chest for acquisitions once it has listed on the Frankfurt stock exchange early in 2021.
US tech companies pile into Jio Platforms. Investments into the parent of fast-growing telecom operator Reliance Jio sought to secure a doorway into the huge Indian market, which is characterized by complex regulatory challenges. Facebook opened the splurge in April (see Social Experiment), pumping in $5.7 billion. The company will hope the deal smooths the introduction of its payments system WhatsApp Pay. Google followed, with a $4.5 billion investment aimed at putting low-priced Android smartphones in the hands of more users in India. Other investors included Intel and Qualcomm.
T-Mobile US continues to rise. Having received the crucial green light to merge with Sprint — a deal that completed in April — T-Mobile has been one of this year’s success stories. No longer a plucky underdog, it recently overtook AT&T to become the number-two wireless carrier in the US (see Instant Insight: Deutsche Telekom Results, 3Q20). And in 5G, its deployment of Sprint’s valuable 2.5 GHz spectrum, combined with its own 600 MHz airwaves, has given it a crucial advantage.
Huawei’s annus horribilis. It’s been another tough year for Huawei. A decision from the UK government about whether its kit could be deployed in national 5G networks was eagerly anticipated at the start of the year and appeared to go Huawei’s way when it was afforded a partial role. However, in July, the government announced an outright ban on operators buying any new 5G equipment from “high-risk” suppliers after 2020, and demanded all kit be stripped out by the end of 2027. A host of other markets including Canada, France, the Netherlands, Italy and Sweden made shifts away from Chinese providers in 2020.
These moves are unhelpful to an industry already suffering from having a very small number of leading network suppliers. As expected, companies like Ericsson have benefited (see Ericsson Shifts to Cloud RAN), but the lack of supplier diversity is one of the most common concerns I hear in my conversations with network operators. It’s a major challenge the industry will need to address in 2021 and beyond.
These are my final thoughts on a tumultuous 2020, and I’d be interested to know if you agree or disagree with my top 10. The year ahead is likely to be every bit as action-packed, and I look forward to sharing further insights. Stay safe and happy holidays!
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