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    Analysys Mason Brief - Covid 19 - 5G Capex 2020

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    Andrey Pritulyuk
    The COVID-19 pandemic will cause a short-term decline in 5G capex spending in 2020, but it is expected to bounce back in 2021. Operators will face disruption to 5G network deployments and weaker consumer and business demand in the short term. However, continued government stimulus spending and a recovery in demand could help drive a rebound in 5G investments. Operators will focus on using 5G to reduce costs rather than pursue new revenue streams in the current environment.

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    Analysys Mason Brief - Covid 19 - 5G Capex 2020

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    Andrey Pritulyuk
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    The COVID-19 pandemic will cause a short-term decline in 5G capex spending in 2020, but it is expected to bounce back in 2021. Operators will face disruption to 5G network deployments and weaker consumer and business demand in the short term. However, continued government stimulus spending and a recovery in demand could help drive a rebound in 5G investments. Operators will focus on using 5G to reduce costs rather than pursue new revenue streams in the current environment.

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    The COVID-19 pandemic will cause a short-term decline in 5G capex spending in 2020, but it is expected to bounce back in 2021. Operators will face disruption to 5G network deployments and weaker consumer and business demand in the short term. However, continued government stimulus spending and a recovery in demand could help drive a rebound in 5G investments. Operators will focus on using 5G to reduce costs rather than pursue new revenue streams in the current environment.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    18 views3 pages

    Analysys Mason Brief - Covid 19 - 5G Capex 2020

    Uploaded by

    Andrey Pritulyuk
    The COVID-19 pandemic will cause a short-term decline in 5G capex spending in 2020, but it is expected to bounce back in 2021. Operators will face disruption to 5G network deployments and weaker consumer and business demand in the short term. However, continued government stimulus spending and a recovery in demand could help drive a rebound in 5G investments. Operators will focus on using 5G to reduce costs rather than pursue new revenue streams in the current environment.

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    COVID-19: 5G capex will bounce back after a short-term

    decline, but operators will have new priorities


    May 2020
    Caroline Gabriel

    Analysys Mason has published an early-stage analysis of the likely impact of the COVID-19 pandemic on 5G
    supply and demand in 2020 and 2021. We believe that the fundamentals of the 5G business case remain largely
    intact. However, there will be disruption to network deployment and weaker demand from consumers and
    businesses in the middle quarters of 2020. The reduced demand is likely to persist for a longer period than the
    network disruption and will drive operators to intensify the focus of their 5G strategies on cost reduction rather
    than new, enterprise-driven revenue streams.

    5G deployments will be disrupted in the short term in 2020, and


    demand will decrease
    Planned network roll-outs will be disrupted in the short term, including delays to spectrum auctions and
    standards, and labour shortages in the supply chain. These and the wider economic uncertainty will drive some
    operators to rethink their investment priorities or timelines. However, most operators worldwide will remain
    committed to their existing overall capex envelopes for the next year or so, although we expect to see some
    reassessment of priorities within these envelopes, which in some areas, especially Europe, will be in favour of
    FTTP or 4G expansion at the expense of 5G. 5G capex will decline slightly in 2020, and we now believe that
    this will be 7% less than our pre-COVID-19 forecast (Figure 1). 5G capex will start to bounce back in 4Q 2020
    and into 2021, and it will be 9.7% greater than our previous forecast for 2021 as a result. However, mobile
    capex overall will decline more sharply, and some non-5G investment will be permanently lost as operators
    intensify their efforts to capitalise on their existing assets.
    COVID-19: 5G capex will bounce back after a short-term decline, but operators will have new priorities | 2

    Figure 1: 5G-related network capex forecasts before and after COVID-19 revisions, worldwide, 2020–2021

    Source: Analysys Mason, 2020

    The scale of the bounce-back in 5G capex will depend on stimulus


    funds and a revival in business demand
    There are two key factors that are essential to the recovery in 5G capex that we foresee in late 2020 and 2021.
    One is that governments around the world emulate the Chinese government and include 5G in their stimulus
    funding and other recovery programmes. Indeed, the government in the USA and elsewhere have suggested that
    support to restart, or even accelerate, 5G build-outs will be part of such initiatives. Operators in China will
    spend 14/5% more than previously planned on their 5G roll-outs in 2020, thanks to support from various
    economic recovery initiatives.

    The second, more fundamental factor is that the demand for 5G services recovers to somewhere close to the
    levels anticipated before COVID-19 (at least during 2021). This is crucial, given that the demand for any service
    will be weakened by the impact of the pandemic on business confidence and survival, and on consumer
    spending power.

    Many operators were hoping to use 5G to monetise the demand for improved network performance from certain
    customer segments. This will now be harder to achieve. There are indications that some niche consumer use
    cases will emerge stronger (such as gaming and live-event streaming), but these have little overall effect on the
    business case.

    More seriously for many operators, the business sector was expected to start to generate incremental revenue to
    improve the 5G investment case from 2021 or earlier. However, future plans for services such as private
    networks, smart manufacturing and IoT are now likely to be put on hold.
    COVID-19: 5G capex will bounce back after a short-term decline, but operators will have new priorities | 3

    Operators will restart 5G roll-outs, despite demand-side


    challenges, and will focus on pockets of new revenue and reducing
    TCO
    The factors discussed above do not mean that 5G deployments will be dramatically slowed down, but rather
    indicate that operators must rethink their business case priorities.

    With fewer new revenue opportunities on the horizon, they will need to intensify their focus on 5G as a driver of
    cost efficiencies in order to make the case for investment in the short term. For instance, greater spectral
    efficiency and virtualised architecture may enable them to support higher capacity at lower cost, while switching
    off legacy networks.

    Pandemic-imposed delays to the finalisation of the next release of the 3GPP standards, and to spectrum auctions
    in some countries, will increase previous timelines by 3–6 months, but will not derail 5G deployment plans.
    Indeed, it may provide a welcome breathing space for many operators, and could allow them to reduce their
    marketing expenditure, generate more mileage from FTTx and 4G and wait for more-efficient next-generation
    5G platforms (notably the cloud-native core) to become fully mature.

    There will also be pockets of new demand, including certain 5G-driven consumer services such as cloud
    gaming. When the dust settles a little, companies may prioritise their plans for digital transformation to manage
    the impact of future outbreaks. Operators should be able to generate new revenue in the areas where 5G can be
    proven to help this process (notably in telehealth) from 2021 onwards.

    Overall, 5G’s role in longer-term mobile network rationalisation is secure. Most operators will pick up where
    they left off, but will use the pause in activity to reassess their business case priorities and consider how 5G fits
    into their overall investment plans.

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