By Tim Hatt, GSMA Intelligence

2023’s big questions

GSMA Intelligence head of research and consulting Tim Hatt assesses what he thinks will be the central issues and big trends of this year’s MWC23 event.

The world is in a state of flux and uncertainty. While the pandemic has receded, geopolitical instability and inflation have emerged as headwinds for consumers and overall economic growth.

The telecoms industry is, of course, exposed to these factors but is also undergoing major change as 5G expands, digitisation grows across the economy, and companies move to a green and sustainable operating model.

In our Global Mobile Trends 2023 report, we took an overarching view of the major trends to think about this year – casting a wide net from 5G consumer and private networks, to sustainability and satellite networks. As MWC23 beckons, it’s worth taking a closer look at two of the biggest trends – the second phase of 5G and sustainability – to delve into what will influence these issues and where we may end up.

5G went mainstream in 2022. What’s the second phase of 5G?

How we got here

Passing 1 billion

5G reached 1 billion connections in 2022, taking it to around 12 per cent penetration of the mobile customer base globally. Penetration is much higher in pioneer markets such as the US and South Korea (over 40 per cent).

Supply and demand working in parallel

One billion connections is a key milestone. However, the fact that 5G’s rise to this level of take-up has happened two years faster than 4G on a comparable basis reflects supply-side (network coverage) and demand-side (consumer willingness to upgrade) factors moving in the right direction.

What will influence performance

Pricing premiums

How well can operators now monetise the 5G consumer and, crucially, enterprise segments, given that overall mobile revenue growth is still in the low, single digits in high-income regions? Existing 5G tariffs are generally being priced at a 10-20 per cent premium on 4G – and consumers are willing to pay – but these will likely be competed away over 2-3 years without new services to justify the staying power.

The ‘wow’ factor

Faster is good, but speeds will not sustain pricing premiums (and therefore revenue growth). A ‘wow’ factor is required to attract new customers or incentivise existing ones towards higher spend. Extended reality (XR) is a candidate here; it has the potential to usher in a new age of immersive consumer experiences that benefit from 5G's advanced capabilities in terms of speed, latency and capacity. But it remains early days for the metaverse. Without evidence of key indicators changing (including VR headset ownership or service-attach rates to 5G tariffs), it is hard to bake-in gains.

Tapping enterprise verticals

Enterprise accounts for around 30 per cent of telecoms sector revenue overall, but this is rising (it was 20 per cent only a few years ago). Private networks, slicing, edge and IoT are all gathering pace with enterprise buyers. The hyperscale presence is now one of co-opetition as much as competition, so look out for more telco-cloud partnerships in service of companies in disparate sectors from manufacturing to power.

Where we land

Consumer

Volumes will grow, with a net gain of 500 million 5G customers in 2023 and penetration moving up 5 percentage points to 17 per cent. This means price premiums should start to feed through to overall revenue growth meaningfully for the first time (even if they are competed away over time). The metaverse and XR could be a wildcard that drives this higher, but we are sceptical for 2023 given weak household virtual reality headset ownership and still a lack of understanding as to what the metaverse really is for most people.

Enterprise

Does business, rather than environmental, logic drive sustainability further in the industry?

How we got here

1.5°C in jeopardy

The central goal of the Paris Accord in 2015, which has continued to guide subsequent COP objectives, will not be met under current national net-zero timelines. Some industries – including telecoms – are stepping up to bridge the gap.

Stubborn costs

Energy costs still account for 20–40 per cent of network opex. This puts further pressure on cashflow in an already low revenue growth environment.

What will influence performance

Better network efficiency

The network accounts for around 90 per cent of electricity use for an average operator. Investments are being made in the RAN, core and data centres to lower that burden. The good news is that indications of progress are evident; core efficiency improved to 0.17 kWh per GB in the mobile network in 2022 from 0.24 in 2021, based on our latest telco energy benchmark study covering more than 40 networks worldwide.

Renewables

Renewables still represent a minority of energy use in the industry worldwide. Europe is highest at over 40 per cent for operators, but access is much more constrained in Africa and Asia.

Investor pressures

Many investors now include hard and fast ESG requirements as part of their asset allocation decisions, conferring an added urgency on management groups to make ESG objectives and tracking clear and in the public domain.

Where we land

Efficiencies

Mobile network energy efficiency should continue to improve as 4G/5G equipment is upgraded, and 2G/3G is sunsetted (5–10× less efficient).

Renewables

The mix effect of renewables should also grow, although at a slower pace than efficiency gains. Renewables still represent less than 20 per cent of grid energy access for most emerging markets. We expect to see more power purchase agreements to mitigate access constraints – a key area of business for renewable energy providers and/or tower companies.

Green = good business

The revenue logic of going green is feeding through. Some 40 per cent of consumers would pay a premium for mobile phone tariffs with a carbon-neutral certification, and the enablement effect on industries makes energy a competitive differentiator for 5G B2B sales.

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About GSMA Intelligence

GSMA Intelligence is the definitive source of global mobile operator data, analysis and forecasts, and publisher of authoritative industry reports and research. Our data covers every operator group, network and MVNO in every country worldwide – from Afghanistan to Zimbabwe. It is the most accurate and complete set of industry metrics available, comprising tens of millions of individual data points, updated daily. GSMA Intelligence is relied on by leading operators, vendors, regulators, financial institutions and third-party industry players, to support strategic decision-making and long-term investment planning. The data is used as an industry reference point and is frequently cited by the media and by the industry itself.