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RTNominal down6.310 -0.160 (-2.473%)

02/12/2019 17:35

5G to drive up Asian telco revenues and costs - S&P

[ET Net News Agency, 2 December 2019] 5G is getting good reception in Asia-Pacific,
with quick uptake in the few markets that have already launched. Higher data consumption
on advanced networks point to 5G as a potential source of faster revenue growth for
telecommunications companies. However, in some countries, 5G-related costs and spending
could hit margins hard. That's according to S&P Global Ratings in a report published
today, titled "First Movers In Asia-Pacific Offer Clues To 5G's Future."
"We believe 5G's faster network speeds, combined with growing demand for high-quality
video content, will drive up demand for data usage," said S&P's credit analyst JunHong
Park. "However, the costs related to rollout and competition will hurt margins."
As a pioneer in the region, and the world, Korea offers a good test case for the impact
of 5G. Within six months of its launch of commercial 5G services in April 2019 around 3.5
million subscribers (representing 5% of total wireless subscribers) adopted 5G services.
Moreover, they consumed triple the data of 4G LTE subscribers over the same period. As a
result, average revenue per user (ARPU) has improved for Korea's three leading telcos: SK
Telecom Co. Ltd., KT Corp., and LG Uplus Corp. However, all three operators also reported
declining margins, due to heavy expenses incurred on 5G marketing and deployment.
At least five Asia-Pacific countries will have rolled out 5G by next year. Besides South
Korea since April 2019, these are Australia (June 2019), China (November 2019), Japan
(March 2020) and Singapore (late 2020).
China's advanced-network construction is still at an early stage. However, S&P expects
an aggressive buildout of infrastructure networks to support 5G in China. The country is
in a hurry to get moving, the credit rating agency said.
Its three state-run telecom operators, China Mobile Ltd. (00941), China Telecom Corp.
Ltd. (00728) and China Unicom Ltd. (00762) rolled out 5G mobile services on 1 November
2019, ahead of the country's initial timeline of a 2020 launch. The services have been
launched in 50 major cities including Beijing, Shanghai, and Shenzhen. However, the
country faces unique headaches due to technology-related trade tensions. (KL)

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