Analysis: South Korea’s high-speed 5G mobile revolution is giving way to evolution

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Engineers install a 5G base station in Seoul, South Korea, May 31, 2019, in this photo provided by SK Telecom. Picture taken May 31, 2019. SK Telecom/Handout via REUTERS/Files

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SEOUL, May 13 (Reuters) – South Korea was the first country to launch a fifth-generation mobile network in 2019, heralding a high-speed technological transformation towards self-driving cars and smart cities.

Three years later, the dizzying promises have not been kept.

Some 45% of the country’s population is now using 5G, one of the highest rates in the world, after spending some $20 billion on network upgrades that have quintupled connection speeds. But telecom companies have been unwilling to invest in the most sophisticated technology that would boost speeds 20 times over 4G technology.

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This is because the demand is not there yet. App makers haven’t brought services like autonomous driving to the mass market that would require more firepower. Customers can watch Netflix and surf the net quite well with the existing 5G technology.

The telcos have adapted by diversifying. Making the quantum leap to high-speed 5G will require the deployment of essential services that require such fast connections.

“When households start having robots in their homes, for example, then telecom operators will start increasing their infrastructure investments, so that high-speed 5G will be partially available around 2025,” Kim Hyun-yong said. , an analyst at Hyundai Motor Securities.

The lesson for other countries moving towards 5G might be: curb your enthusiasm. The new technology is very promising, but for now, there will always be as much evolution as revolution in the future of high-speed Internet.

In April 2019, South Korea’s three mobile carriers – with a PR campaign featuring K-pop stars and an Olympic gold medalist – along with Verizon Communications of the United States – rushed their 5G commercial launches ahead of schedule, all eager to claim the top spot. in high-level wireless technology.

Asia’s fourth-largest economy remained the pioneer of 5G, but the hype had started to fade even before COVID-19 caused demand for 5G devices to plummet. Companies have been reluctant to invest the estimated $370 billion needed to deliver the fastest 5G, and revenue growth has stalled.

“Deploying 20 times faster 5G is nearly impossible, even in Seoul,” said Ku Hyun-mo, CEO of major South Korean telecom operator KT Corp (030200.KS).

“It is simply impossible to establish national coverage – the 5G frequency moves directly and cannot bypass obstacles,” Ku told Reuters. “She can’t deliver the same speed once she’s gone a few hundred yards.”

The fastest version, using ultra-shortwave in a high-band spectrum called millimeter wave (mmWave), would require 15-20 base stations per square kilometer (40-50 per square mile), compared to just two to five for 4G, according to a McKinsey report.

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South Korean telecom operators have built about 215,000 5G base stations, but only 2% of them can handle mmWave. Other countries that have introduced 5G, such as the United States and China, also rely heavily on the slower midband spectrum.

In March, South Korea had 22.9 million 5G subscribers, just under half the number of its 4G users. By contrast, when 4G celebrated its third birthday, its users had more than doubled those of its predecessor.

“When 4G was first rolled out in 2011, demand for data skyrocketed to watch YouTube and Netflix, and users aggressively switched to 4G,” said analyst Kim. Now, however, “telecom operators currently lack a service that can generate greater data demand” that would justify paying for 5G, he said.

During the first two to three years of 4G, the average revenue per user (ARPU) of operators increased by 5% to 12% per year. On the other hand, KT’s ARPU increased by 3.7% in the first quarter compared to the previous year, while that of SK Telecom Co (017670.KS) increased slightly by 0.6% and LG Uplus Corp (032640.KS), third, recorded a decline of 4.2.

“If telcos stick with the current connectivity business, they will plateau,” KT’s Ku said.

Mobile operators are increasingly turning to new businesses. KT is developing artificial intelligence to power call centers, hoping business will double this year, while SK Telecom has seen increased revenue for cloud services and data centers.

Diversification is paying off with investors so far. Shares of SK Telecom and KT have risen around 26% since the 5G rollout, beating the broader market’s 18% rise, although ARPU growth has slowed.

“From 3G to 4G, data demand has increased exponentially. But right now, data demand is increasing linearly,” said Hyundai’s Kim. “Mid-band 5G would facilitate the popularization of 5G and serve as a gateway to the next stage.”

($1 = 1,275.6400 won)

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Reporting by Byungwood Kim and Joyce Lee; Editing by Miyoung Kim and William Mallard

Our standards: The Thomson Reuters Trust Principles.


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