China is at the forefront of developing the 5G ecosystem, leading to a significant increase in the revenue of all its three major service providers. The success of the country’s three major carriers demonstrates the revenue-growing potential of 5G technology.

China Mobile has recorded revenue growth of 10.5% and mobile revenue growth of 2.5%. On the other hand, China Telecom and China Unicom reported overall revenue growth of 9.4% and 8.3%, respectively. This corresponds with an increase in the 5G penetration rates from 6.7% in Q1FY21 to 28.5% in Q1FY22 to 44.6% in Q1FY23. This is mainly because of the incredible success the three telecom players achieved in rapidly migrating users to 5G.

The 5G ecosystem is at a crucial juncture. While the carriers have succeeded in growing their revenue by migrating users to the new technology, they need to now focus on the new capabilities for both individuals and businesses.

Understanding the two waves of 5G

“There are two waves of benefits in 5G development. First, the conventional user migration coupled with the traffic stimulation model has facilitated good results in China and among the first wave of 5G carriers outside China. The second wave is the model of “experience-based monetization through existing users along with the development of new services” and evolution towards a 5.5G. This can enable more powerful IoT/IoV and upgrade the overall 5G industry,” says Richard Liu, President of Global Carrier Marketing and Solution Sales, at Huawei. He was speaking at the ongoing Mobile World Congress Shanghai 2023 during the 5G Business Dialogue Salon.

Several Chinese and international carriers have already significantly increased revenues by enabling a rapid migration of existing users to 5G, which is the first wave of developing the 5G ecosystem.

China Mobile recorded a 10% increase in Average Revenue Per User (ARPU) for 5G players vis-à-vis 4G telcos. This has led to a revenue increase of 10.5% for the Chinese carriers. On the other hand, AIS in Thailand reported a 15% increase in ARPU, leading to revenue growth of 2.3. Zain KSA focused on Fixed Wireless Access (FWA) which led to ARPU growth of as much as 40% and a revenue increase of 14.8%.

“Specifically, 5G improves user experienced rates and delivers on higher-definition and smoother video services, thereby improving DOU and traffic volume, which translate into increased revenues,” explained Richard Liu.

The industry now needs to focus on the second growth wave to move from 5Good to 5Great by creating value-based operations and new pathbreaking 5GtoC and 5GtoB services. The second wave will allow the carriers to create use cases based on user segmentation and develop new services and industry upgrade. China is taking the lead in the second wave of 5G growth by developing use cases like new calling, cloud phones, naked eye 3D, 5G private networks and passive IoT, among others. For instance, New Calling allows telcos to enhance voice and video calling, which can potentially unlock a market worth hundreds of billions of dollars.

Addressing the growing needs of businesses 

In the coming times, several 5GtoB services will accelerate the digital transformation of enterprises leading to significant gains for the telcos.

“5GtoB is a new growth engine that has driven continued rapid growth in China, whose success has been replicated in many industries outside China. The strong capabilities of 5.5G will enable industry upgrade,” says Richard Liu.

Several new uses are leading to the growth of this market. A case in point is China Unicom’s 5G package for streaming, which allows 50% improved uplink speed and higher priority. This has led to a 76% increase in ARPU for the telco. Another example is 3 Hong Kong’s 5G package for stock trading which allocates two times the network resources for priority assurance.

5G private networks is an important use case of this segment. In China, this market has grown from just $0.2 billion in 2020 to $0.5 billion in 2021 and $1.1 billion in 2022. Globally also, the telcos realize the importance of this segment leading to an increase from 104 private networks in May 2022 to 209 in May 2023.

As the industry moves from the first wave of 5G growth to the second wave, it must work together to further 5G development and exploration to maximize revenue. The industry needs to accelerate the adoption of 5.5G to confidently move 5Good to 5Great. The growing adoption of 5G use cases means the industry must move towards 5.5G to delight people and businesses with new use cases and to address the growing expectations of digital users.