2021 telecoms preview: open RAN, towers and enterprise
digitisation
INSIGHT SPOTLIGHT
Before the pandemic, the telecoms sector was already
undergoing significant changes from a raft of trends,
including new network models, 5G commercialisation
and servicing enterprise verticals. While the pace of
change has continued in some respects, in others it has
been masked, subdued or delayed as the
reverberations from the pandemic occurred.
Analysis
Network infrastructure: open RAN and tower sharing
There has been a paradigm shift in network infrastructure over the
last three years, as models of network ownership and operation
have changed significantly. Open RAN vendors have made inroads
by offering (generally) very competitive pricing and flexibility with
reduced lock-in. In parallel, tower sell-offs and spin-outs continue
at pace, the proceeds of which allow operators to pay down debt
and/or invest in new projects or business lines.
What to watch for in 2021
• Open RAN’s chicken-and-egg issue – On the face of it, open
RAN momentum should continue to build. Open RAN has
become the native approach to 5G networks for a number of
high-profile groups, notably Rakuten (Japan) and Dish (US).
However, there is a chicken-and-egg issue – that is, operators
want to adopt the technology once it has scaled but with this
scale only being possible after operators adopt the technology. It
remains to be seen how much of a problem this will pose in the
near term of 1–2 years. This will be a critical time for 5G rollouts,
during which vendors will need to be capable of delivering
networks on a national-level scale.
• Infrastructure consolidation – On the tower front, a number of
further consolidations have been announced. Telefónica will sell
its infrastructure business (Telxius) to American Tower for €7.7
billion, while Vodafone’s Vantage will expand its portfolio by
assimilating the mobile towers of the Vodafone/O2 UK network
share. An open question is whether the divestment of towers by
operators makes wholesale access to competitors a part of sale
and leaseback agreements.
Overall view
Open RAN will continue to make inroads, particularly for operator
networks servicing B2B clients and enterprise connectivity
providers. Its share in national mobile networks is likely to be more
limited for now since most operators have already made
commitments to incumbent vendors for the bulk of national 5G
builds. We expect the trend of infrastructure consolidation to
continue through 2021, and broaden from Europe to Africa and
Asia.
© 2021 GSM Association @GSMAi
As we look ahead to 2021, a number of storylines will
continue to run: the pandemic impact, commercialising
5G, new ways of designing/running mobile networks
and the digitisation of the enterprise. This Insight
Spotlight addresses the latter two, the others having
been discussed in our previous piece.
IoT and enterprise digitisation
IoT is now mainstream: our latest enterprise survey suggests 65%
of enterprise firms (of at least 20 employees) have an active IoT
deployment – and plans for further additions. The pandemic has
had a detrimental impact on enterprise IT spend and new projects.
The share of companies planning an IoT deployment in the next 12
months has dropped from 60% to 39%. Consequently, we have
downgraded our overall IoT revenue forecast by nearly 20% to
$906 billion in 2025.
What to watch for in 2021
• Spend recovery – Business investment moves cyclically with
economic growth. Many of the delayed projects are just that,
meaning the budget is latent. Should a recovery ensue in the
second half of 2021, spend should start to come back online in
support of digital transformation plans.
• Private network deployments – Based on our enterprise
survey, 20% of enterprises have a location-specific coverage
requirement, but 55% rate private networks as “very important”
to their IoT plans. The actual demand is likely to sit somewhere
in between the two figures, which is a large number when scaled
across early-adopter sectors, notably manufacturing, healthcare
and utilities.
Overall view
2021 is likely to be an improvement on 2020, even if the first few
months are suppressed by the macroeconomic climate. SOHOs and
SMEs will be under pressure for longer than bigger companies.
Large companies in essential production sectors that are less
exposed to lockdown restrictions (e.g. manufacturing) are likely to
push ahead with capital investment in support of digital
transformation plans, given that many projects have multi-year
deployment timelines. In addition, most companies with plans to
invest in IoT, 5G and/or cloud services are now driven by new
revenue generation (68% of surveyed enterprises), which can take
time to materialise. A similar proportion (65%) are driven by cost
savings, but this has come down markedly from 2018 (85%), when
efficiencies were the de facto reason for upgrading IT equipment.
www.gsmaintelligence.com
 2021 telecoms preview: open RAN, towers and enterprise digitisation
Implications
Mobile operators
• Seeding the open RAN ecosystem – It is widely recognised
that open RAN presents potential benefits in cost savings,
reduced vendor lock-in and flexibility in how network elements
are more quickly deployed. And, despite a degree of
competitive friction, the big picture is of a gradual convergence
in network architecture towards a more flexible software-driven
model that all vendors will eventually follow to a greater or
lesser extent with the figurative pull of gravity. This must,
however, be weighed against practical realities. Operators face
large capital outlays for 5G networks that are depreciated over
a 5–7 year period. If contracts are awarded to traditional
vendors, open RAN’s participation is more likely to be on a
targeted/tactical level (e.g. in rural areas) in the near term.
Vodafone’s UK commitment to 2,600 sites being run on open
RAN (approximately 15–20% of its national footprint) is a
reasonable guide. In the near term, the more visible impacts
are likely to be in enterprise settings, such as manufacturing
plants, where network deployments are more targeted and
allow operators to modularise services such as edge and
slicing.
A scaled ecosystem with wider representation in mobile
networks is probably some years off. How quickly this happens
will in large part depend on the buying behaviours of mobile
operators. Our survey data indicates that a majority of
operators (57%) intend to add at least one new supplier to
their roster for 5G kit. Open RAN vendors such as Mavenir,
Altiostar and Parallel Wireless can make inroads, but they may
need to look at countrywide or regional partnerships to
increase their scale on a case-by-case basis.
Related reading
Network Transformation 2020
Enterprises speak: IoT gets real
© 2021 GSM Association @GSMAi
• Navigating competitive dynamics in the enterprise – While
operators are the main providers of 5G connectivity, enterprise
customers are now purchasing services as bundles more often
rather than as a collection of standalone products from
different suppliers. This means that operators need to act as IT
and OT consultants that help solve problems rather than being
straight connectivity providers, which entails an operational
mindset change. The other challenge is that equipment
vendors (Ericsson, Huawei and Nokia) continue to enjoy higher
preference ratings than operators among enterprise buyers for
private networks. As a result, there could be more partnerships
or consortium-style approaches that involve operators and
vendors jointly bidding for enterprise 5G contracts with each
supplying separate services.
• Revenue proof points – If the enterprise sector is to become a
meaningful source of new 5G revenues for operators, proof
points are needed. Although it remains early days, disclosure is
still very limited, with only a handful of operators (mostly in
South Korea) even releasing 5G subscriber counts. The
combined share of B2B, IoT and other enterprise services, such
as security, averages 20–30% of revenue for the largest
operators (with variance). However, it is not so much the overall
share that matters as the influence on overall mobile revenue
growth. As new 5G enterprise wins are announced in early-
adopting sectors, such as manufacturing, financial services and
healthcare, indications of the impact on overall revenue will be
closely followed over the next 2–3 years.
Author
Tim Hatt, Head of Research
Sylwia Kechiche, Principal Analyst
www.gsmaintelligence.com