There is no doubt that 5G holds exciting potential and opportunities for mobile network operators (MNOs). However, at the same time, many MNOs are concerned about making a profitable return on the hefty investments required to build out the new networks.
For all the hype about the potential of 5G to enhance consumers’ experience and lifestyles, the fact is that sufficient payback is unlikely to come from the consumer segment. Individuals may be prepared to pay more for a 5G connection, but this will not be enough on its own to cover the massive capital expenditure involved.
What is more, most new value created via 5G will go to service platforms – up to 95% - rather than the telcos writing the cheques. Therefore, the operators’ focus must shift to their enterprise divisions. Enterprises may be unlikely to pay more for the higher speeds 5G will bring but will invest to dramatically improve productivity, safety, security and efficiency.
Often the telecom industry has connected drivers of value with a customer proposition. In the new 5G world, there are five features that will be the key drivers of value: capacity, reliability, latency, bandwidth and efficiency. It is the combination of these features that will be transformational in what the MNO can enable for the enterprise customer.
Indeed, research and analysis by KPMG has identified an estimated £3.28 trillion in value to be unlocked globally through use-cases over the next seven years. In the UK specifically, we estimate some £97.64 billion of value.
This value won’t be confined to MNOs or the telco sector – it will be spread across a whole web of sectors such as government, finance, healthcare, manufacturing, consumer goods/retail, and technology/media industries – the businesses that telcos support.
How will this value be realised? Improvements in the enterprise will be driven by new capabilities that solve a complex problem or unlock an opportunity for the business to create a competitive advantage. These are not the same as the benefits of 5G – they are the business outcomes that can be delivered by it.
We see six components to this DNA of 5G enterprise value:
Of course, it won’t be a case of throwing the 5G switch and seeing the new world instantly emerge. It will take some time to develop and is likely to be a case 'initially' of rollouts in smaller areas – what we call campus-style or private networks. Localised smart manufacturing environments will be an example of this. After that, we are likely to see the growth of city use-cases, enabling various ‘decentralised’ verticals to unlock value, including healthcare and financial services, along with mobility, live entertainment and more.
As a result, I believe that MNOs should focus considerable efforts on the verticals where they can create value in the short term – such as manufacturing – and thereby create the returns their boards need to see in order to further invest in 5G. A longer-term focus is also important – but without some immediate financial returns the investments may not be forthcoming in the first place.
A 5G approach requires MNOs to think differently. They need to understand their enterprise customers’ real problems and help solve them through 5G. The effects could be transformational, unlocking value across the economy.