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February 27, 2018
BARCELONA -- MWC 2018 -- Mobile network vendors are hoping for a sales boost as operators start to roll out 5G, and would love to see telcos increase their budgets. But at least one of the world's biggest service providers believes it can reduce spending as it deploys 5G, and others reckon annual investments will not rise.
Japan's NTT DoCoMo Inc. (NYSE: DCM) is forecasting a continued decline in annual spending following the initial rollout of 5G technology. In a PowerPoint slide seen by Light Reading, it even suggests that one of 5G's "killer services" could be "data capacity enhancement with no increasing trend in capex."
The slide shows that NTT DoCoMo's capex has fallen from a peak of nearly 1 trillion yen ($9.3 billion, at today's exchange rate) in 2001, when 3G services were launched, to less than JPY600 billion ($5.6 billion) last year.
"In the past capex has been on a downward trend," said Seizo Onoe, NTT DoCoMo's chief technology architect, during a presentation by the Next Generation Mobile Networks (NGMN) Alliance at the Mobile World Congress earlier today. "We can continue this trend."
Technology advances could help to reduce the 5G bill. NTT DoCoMo was today revealed to be one of the founder members of a new 5G technology initiative called ORAN, which aims to bring white box hardware and open source code into the radio access network (RAN). One of the objectives is to reduce RAN costs and make 5G rollout more economical, says Bruno Jacobfeuerborn, a senior executive at Deutsche Telekom AG (NYSE: DT), which is also a part of ORAN. (See Major Telcos Pool Efforts to Slash 5G RAN Costs.)
For other operators, however, the expectation that capex will not increase is based on a harsh commercial reality. "Revenue is not growing and has been very flat or rising just 1%, and so there is no room for increasing costs," said Johan Wibergh, the chief technology officer of Vodafone Group plc (NYSE: VOD), during the NGMN presentation. "And if you look at spectrum auctions, that is an extra cost. We don't have more money to spend but less. That is the reality."
Deutsche Telekom's Jacobfeuerborn similarly complained about spectrum costs, echoing several other telcos and vendors who have this week grumbled about policymakers and regulators. "We can't print money and frequency auctions are different in Europe than Asia, where you almost get it for free," he said. "If regulators want fast [5G] rollout, they need to understand this."
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Deutsche Telekom is due to provide more details about its 5G spending plans at a capital markets day in May, but the operator has already indicated that overall capex is likely to shrink next year, after peaking at €12.5 billion ($15.3 billion) across its entire footprint in 2018. It spent about €12.1 billion ($14.8 billion) in total in 2017.
Jacobfeuerborn reckons ORAN could help to slash RAN costs in half, and says they would currently account for about 70% of overall spending on 5G network rollout.
Michael Irizarry, the chief technology officer for US Cellular , was coy when asked about his company's capex expectations but said 5G "would have to cost no more than 4G and probably less."
Industry analysts believe 5G rollout could take many years in some markets. Wibergh, who has previously indicated that 5G is about ten times more cost-efficient than 4G, says Vodafone will probably use 5G to support smartphone connections before it explores new service opportunities. (See Vodafone CTO: 5G Is Overhyped & It's Mainly About Cost.)
"The most likely scenario is that 5G gets rolled out to handle more capacity because of more favorable economics," he says. "Then you add on other use cases, but that will happen gradually."
— Iain Morris, News Editor, Light Reading
International Editor, Light Reading
Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).
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