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Thanks to service expansion in the newest network (approx. 7 million Poles), more and more Plus clients show interest in packages dedicated to 5G. In its latest 5G offer, launched in mid-January this year, the operator proposes an acceptable offer with packages Internet-voice services and Internet tariffs, both for individual clients or companies. Service prices are significantly more expensive than LTE networks. This raises the question of the potential impact of 5G mobile internet and 5G technology in general on mobile telecoms revenues.
Mobile packages dedicated to 5G in Plus network
In mid-January this year, Polkomtel launched new tariffs for mobile services dedicated to the 5G network. In the newest tariffs with Internet-voice services, individual as well as business clients have a choice of three new kinds of subscription. The offers include access to the fifth generation technologies (up to 600 Mb/s), and generous data packets, unlimited minutes, text and media messages. After using the packet, they will still have access to the Internet, however, its speed will reduce to 1 Mb/s.
For packages with 35, 100 and 150 GB, individual clients will pay receptively PLN 60, 90 and 120 per month, respectivelly. New consumers will have an opportunity to use the subscription for free for a period of 4 months. When it comes to business clients, they will have slightly bigger data packets at their disposal, with the exception of the cheapest one – 35 GB for PLN 60 net. 120 GB will cost PLN 90 net, and 180 GB – PLN 120 net.
Polkomtel has also offered new mobile broadband offers dedicated to 5G. The new, larger packages for individual customers are 500 GB for PLN 100 per month and 1,000 GB for PLN 200. Business customers get 600 GB and 1,200 GB respectively for the same prices + VAT.
The remaining mobile operators (Orange, T-Mobile and P4) continue to offer 5G services as part of their basic existing tariff plans. In this case, 5G services are enabled for holders of more expensive subscriptions.
Dedicated 5G packages: space for additional revenue for telecoms?
The new prices for 5G services in Plus dedicated packages are more expensive than the existing fifth generation services offered under existing tariff plans. Statistically, 5G tariffs for individual customers are more expensive by 80% on average. This shows a trend in the market where operators are aiming at increasing monetization of mobile services, especially mobile data transmission. This is in line with the telecoms’ strategy focused on building value and selling more services (de facto larger data packets) for a higher price (more-for-more strategy).
Significantly more expensive prices for 5G services than LTE networks are further influencing the mobile market’s exit from the impasse of past discounting. This is related to telecoms’ acquisition policies and infrastructure expansion, mainly 5G networks, which requires significant capital outlays. At this point, this is particularly impacted by the price hikes for mobile services initiated and made primarily in 2019. In the longer term, as interest in 5G services increases and 5G networks are launched on full-fledged frequencies (3.4-3.8 GHz), monetization of more expensive 5G services will also positively impact telecoms’ financial results.
However, this raises the question of the pace and scale of this phenomenon, i.e. to what extent and how quickly mobile users will be able to switch to the new technology. Taking into account that the current 5G services (2 100 and 2 600 band) in terms of technology and parameterization do not differ significantly from the services provided on LTE-Advanced network, mass migration towards the fifth generation solutions should not be expected within this year. The more so, as these services are clearly more expensive than the current tariffs. Moreover, despite the anticipated GDP rebound in the Polish market due to the COVID-19 crisis and the increase in the purchasing power of Poles, consumers will focus more of their attention and additional financial resources on classic broadband when it comes to telecommunications services. This is because established work and remote learning create additional demand for high bandwidth fixed lines. On the other hand, in unwired areas where fixed infrastructure does not reach, also strictly internet-based 5G tariffs should benefit from the mentioned epidemic situation.
At this point, a certain barrier to the smooth deployment of 5G networks is also still the relatively low availability of 5G smartphones on the Polish market, and consequently the low penetration of these devices. For example, Orange communicates that smartphones with this technology currently account for 14% of phones sold. Besides, the prices of handsets with 5G are relatively high at the moment. On the other hand, the offer of affordable models of smartphones operating in this technology is growing. Smartphone manufacturers’ representatives admit that this year, 5G cameras will make up a large part of their product launches. In the case of some – even the majority.
PMR expects a greater and accelerated monetization of 5G services after the launch and greater development of commercial 5G services based on dedicated frequencies in the 3.4-3.8 GHz range and Stand-Alone infrastructure (instead of overlay infrastructure). This is a perspective for 2022 and beyond (an auction for the aforementioned frequencies 3.4-3.8 GHz is to be held in the first half of this year, and 700 MHz and 26 GHz in the following years). Nevertheless, it should be remembered that the main task of the 5G network in the consumer market is to increase the capacity of the mobile network in order to serve more users and transmit more data. As far as the parameterization of the service is concerned, it should still be similar to the current LTE-Advanced or LTE TDD speeds, so for the average person (ordinary smartphone user) the transition to 5G technology will not be a major necessity. However, the changes should be noticed by the group of heavy Internet users, which includes computer gamers. This will result in an evolutionary rather than a sudden and massive migration of users towards 5G technology. PMR does not expect Poles to move massively for more expensive high-speed connections. In the meantime, mobile operators will be forced to lower 5G tariff prices to some extent. This will have a limiting effect on telecoms’ revenues. The current high prices of 5G services are mainly a marketing ploy to position 5G as a premium product before it becomes standard.
Monetization of 5G networks primarily focused on business solutions
The long-term outlook for the value of the mobile market in Poland, ending in 2025, according to PMR, remains upward, but it still does not see a major impact of 5G technology on telecoms’ revenues. This is because PMR expects greater monetization of 5G services not from the consumer channel (larger and more expensive data packets), but from the B2B segment. Based on fifth generation technology, mobile networks will expand their offerings to new business sectors, such as smart factories, autonomous transport, remote healthcare, agriculture and retail, as well as enabling private networks for industrial users. PMR expects more advanced use of the above solutions only after 2025, so you will not see them reflected in the value of the mobile market over a five-year horizon. It should also be added that it is still an open question how telecoms will report revenues from 5G solutions for the B2B segment.
Author: Katarzyna Sacha, Senior ICT Market Analyst