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January 2, 2024
1. Telcos chasing AI
Telcos are grappling with AI like everyone else, and right now it's the Korean and Japanese operators that are the most ambitious.
SKT and KT Corp have unveiled aggressive AI strategies and have begun deploying their own Korean language AI-based chatbots. In Japan, SoftBank is building Japanese language large language models (LLMs), while the NTT Group has developed a generative AI service for enterprise.
2024 will be our first opportunity to see if these early AI services can generate revenue or drive growth.
Less conspicuous, but in the longer term probably much more significant, will be AI's impact on improving operations and productivity and driving down headcount.
Watch for: AI-IoT integration – a winning combo
2. Huawei's reboot
In its own words the Chinese vendor has "weathered the storm," returning to growth after several years of declining sales and profits.
In 2024 it will again be the telecom industry's most closely scrutinized company. Its sanctions-defying 5G handset chip created a sensation last year, reviving its smartphone business in a single stroke.
But it faces big tests in 2024. Will Huawei and manufacturing partner SMIC be able to make enough of the chips? More importantly, will it be able to build on that success with further breakthroughs?
The other big Huawei talking point is its auto business, now spun off into an autonomous subsidiary and positioned, it hopes, to be an integrated partner for China's car giants.
Watch for: Can Huawei and partners continue to squeeze advances out of older-generation chip technology?
3. US vs China tech throwdown
It seems that loopholes in the US sanctions allowed the China chip sector led by Huawei to skirt the restrictions and create advanced chips.
The US announced tighter sanctions in the wake of this episode, and we now see the Dutch government recently blocking the export of some ASML gear to China. But China has just introduced restrictions of its own on rare earths processing.
Besides chips, the two countries are also vying to dominate in AI, quantum computing, subsea cables and wireless networks. Geopolitics will dominate the direction of Asian telecom in 2024 and years to come.
Watch for: Will the US further ratchet up sanctions on Chinese firms?
4. The satellite revolution
Starlink and OneWeb have struck deals with telcos in half a dozen countries from Japan to New Zealand, enabling access to fast broadband from anywhere while also improving the economics of rural cellular backhaul.
On the other satellite track we see the emergence of direct-to-device satellite services, supported so far by Huawei and Apple, with Deloitte predicting sales of 220 million units in 2024.
These may be small markets in financial terms, but we are going to see the economics of remote telecom transformed and the creation of new IoT and consumer satellite services.
Watch for: Telcos competing for remote connectivity business through their respective LEOsat partners
5. Can 5G-Advanced advance?
With Release 18 now frozen, 5G-Advanced is coming into focus. Commercial services are expected to roll out in 2025, but, after bingeing on 5G, telcos have little appetite for more mobile capex.
Not even the Chinese operators, the most enthusiastic builders of 5G, have shown much interest.
5G-Advanced might be pitched as merely an inexpensive upgrade, but service providers will look long and hard at the business case before parting with scarce funds.
Watch for: How many operators will publicly commit this year?
6. The search for deals
Asian telcos in recent years have bolstered their balance sheets through the sale of passive tower assets and mergers.
In the current tough environment, they will dig deep to find non-core assets to sell off. Some more fancied assets such as Axiata's edotco will continue to draw attention.
Meanwhile, private-equity firms are attracted to the robust cash flow from infrastructure, so expect a steady drumbeat of news of potential M&As involving Asian fiber network players.
Watch for: Yet another tilt at HKBN?
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