News on November 1 According to "CreditSuisse" news, Credit Suisse's global telecommunications team released a forecast of 5G progress in 29 research institutes covering countries and regions: by 2024, 5G users will reach 2.3 billion and global revenue will reach 3,830 Billion U.S. dollars, and 958 billion U.S. dollars of capital expenditure will be required during 2020-24.
As of June 2020, 5G package penetration rates in South Korea and China have reached 15.1% and 8.1%, respectively. But the problem is that there is still a lack of "killer apps" to promote the popularization of 5G, leading to the current main driving force being large data packets and new mobile phones, rather than users willing to pay for exciting new services. After the 5G iPhone is released, the United States is expected to follow this path.
Due to the lack of corresponding applications to drive demand growth, Korean operators promote the use of 5G by providing unlimited data packets. They also rely heavily on 5G mobile phones as a marketing tool, and operators encourage users to use 5G in order to be the first to get popular models and mobile phone colors. At first, operators also provided large mobile phone subsidies, but now they have reduced subsidies to improve profitability. In China, operators do not provide mobile phone subsidies, but also due to the lack of "killer apps", operators use large data packets and 5G mobile phones as their main marketing tools. In these two markets, with the introduction of 5G, average revenue per user (ARPU) and revenue have increased, but they are not enough to generate attractive returns on capital; therefore, the Korean market has recently reduced subsidies. In Europe, we see that operators also focus on large-value data packets and encourage up-sells to existing customers who use high-value packages. In the United States, the release of 5G iPhones is critical to the widespread use of 5G; profitability will largely depend on the level of subsidies.
Huawei has a dominant position in China's equipment supply, but it is absent in the US market. Due to the US chip embargo, Huawei's long-term viability is facing uncertainty, and the current 5G network still lacks killer applications / 5G monetization prospects are also challenging, which makes operators in Europe, Asia and Latin America tend to be cautious and delay Commercial launch of 5G. Overall, we lowered China/Europe's relevant capital expenditure forecasts for FY2022 by 2.5%/2.0% to US$49.8 billion/US$33.9 billion, respectively. The resulting cash flow retention, and we believe that the capital expenditure savings generated by the OpenRAN architecture are not enough to attract a large number of new entrants, indicating that some telecom markets may be more attractive to investors than originally expected.
Overall, Credit Suisse lowered its China/Europe related capital expenditure forecasts for FY2022 by 2.5%/2.0% to US$49.8 billion/US$33.9 billion, respectively.