5G commercialization two years review: Operators spent 175.7 billion yuan last year and have built the world's largest 5G mobile network

"As of the end of February 2021, a total of 792,000 5G base stations have been built, the independent networking mode of 5G networks has covered all prefecture-level cities, and the number of 5G terminal connections has reached 260 million." At the regular policy briefing of the State Council on April 19, Liu Yulin, deputy director of the Information and Communications Development Department of the Ministry of Industry and Information Technology, summarized the phased achievements of 5G construction-my country has initially built the world's largest 5G mobile network.

[[396069]]

Since the Ministry of Industry and Information Technology issued 5G licenses on June 6, 2019, my country's 5G construction is about to complete two years. If 2019 is the first year of 5G and 5G construction is still in its infancy, then 2020 is the critical period for 5G, and China has become the "vanguard" of 5G.

How many 5G base stations did my country's three major operators build last year? How much capital expenditure was made on 5G? How is the number of 5G users growing? How is the progress of 5G applications? Both the industry and ordinary users are extremely curious and interested in the development of 5G, a new mobile communication technology.

The three major operators spent 175.7 billion yuan on 5G construction last year

On April 21, the Ministry of Industry and Information Technology released the latest economic operation of the communications industry in the first quarter of this year. Statistics show that as of the end of March, the total number of 5G base stations in my country was 819,000, of which 48,000 were newly built from January to March, and the number of 5G mobile terminal users of the three basic telecommunications companies reached 285 million, accounting for 17.8% of mobile phone users.

According to the 2019 Communications Industry Statistical Bulletin, the number of 5G base stations in my country was about 130,000 at the end of 2019. It took my country just over a year to increase from 130,000 to 819,000.

As the main force in 5G construction, the three major operators' spending on 5G cannot be underestimated. Huatai Securities pointed out that the proportion of 5G capital expenditure of the three domestic operators in total investment is significantly higher than that in the 4G period.

The three major operators also released their 2020 annual financial reports last month, with both revenue and net profit increasing. In terms of 5G construction, not only has the number of base stations increased, but 5G SA, which truly reflects the "5G specialty", has been commercialized.

China Mobile said that it built about 340,000 new 5G base stations last year and put into operation a total of 390,000 5G base stations, providing 5G services to all prefecture-level cities, some county towns and key areas across the country. In September 2020, the cloud-based and centralized SA core network was put into use.

China Unicom added 300,000 5G base stations last year (of which the company built nearly half), and by the end of 2020, the cumulative scale of 5G base stations reached 380,000, achieving for the first time in history a coverage scale that is basically equivalent to that of the leading operators. As a co-construction and sharing partner of China Unicom, China Telecom has 380,000 5G base stations in use, and is the first in the world to achieve large-scale commercial use of 5G SA networks, launching Zhiyuan, Bilin and Ruyi 5G customized networks.

How much did the three major operators spend on 5G construction last year? According to official data, the three major operators' 5G-related capital expenditures in 2020 totaled 175.7 billion yuan, a year-on-year surge of 326.45%. In 2019, 5G capital expenditures were only 41.2 billion yuan. Specifically, China Mobile spent 102.5 billion yuan on 5G construction last year, China Unicom spent 34 billion yuan, and China Telecom spent 39.2 billion yuan.

It can be seen that 5G is more expensive than 4G. In comparison, in 2013, the Ministry of Industry and Information Technology officially issued the first batch of 4G licenses to the three major operators. In 2015, the domestic operators' 4G capital expenditure peaked at 160.2 billion yuan, which was lower than last year's 5G capital expenditure.

Along with the rapid development of 5G network construction, the proportion of 5G mobile phones has increased and the number of 5G package users has increased. According to the data from the China Academy of Information and Communications Technology, the cumulative shipments of 5G mobile phones in China last year reached 163 million, accounting for 52.9%, while in 2019, 5G mobile phones accounted for only 3.5%.

In terms of the number of 5G package users, China Mobile's total number of 5G package customers ranks first. China Unicom's 5G package users reached 70.83 million last year, with a penetration rate of 23%; China Telecom's 5G package users reached 86.5 million, with a penetration rate of 24.6%; China Mobile's 5G package customers reached 165 million, a net increase of 162 million.

Initial construction of 5G industry application business model

Against the backdrop of rapid 5G network construction and the official commercial use of 5G SA, the industry is also actively exploring 5G applications.

What was the progress of 5G application last year? In the "White Paper on China's 5G Development and Economic and Social Impact (2020)" (hereinafter referred to as the White Paper), the China Academy of Information and Communications Technology pointed out that despite the rapid development of network construction and the number of users, 5G networks are still in the early stages of large-scale coverage, and the user penetration rate has just exceeded 10%.

"Industry-level applications have begun to be piloted from 0 to 1. 5G industry applications are expected to form large-scale commercial application scenarios in many fields, and the business model has been initially established; 5G consumer-level applications are still in the early stages of introduction, and innovative applications are still being cultivated."

Unlike 4G, which has spawned a variety of C-end applications, 5G is the era of industrial Internet. Qianzhan Industry Research Institute believes that based on the specific practice of 5G in various industries, 5G to B can be roughly divided into eight vertical industries, namely industrial manufacturing, smart grid, media entertainment, medical health, Internet of Vehicles, smart city, smart finance, and smart education.

According to Ding Yun, president of Huawei's Carrier BG, 5G toB commercial use will start in 2020. More than 20 industries around the world have deployed 5G demonstration applications, such as coal mines, industrial manufacturing, ports, etc. Global operators have signed more than 1,000 5G industry application contracts.

The three major operators are exploring the industry applications of 5G and actively building "showrooms". Last year, China Mobile completed more than 100 group-level leading demonstration projects, expanded 2,340 provincial regional characteristic projects, and landed 470 5G private networks; China Telecom focuses on the industrial Internet, smart energy, smart medical care, smart parks and other market segments, and has signed contracts with nearly 1,900 customers and implemented more than 1,100 scenarios; China Unicom focuses on the industrial Internet, smart cities, medical health and other fields, and has more than 250 "lighthouse" high-quality customers.

In 5G consumer applications, the white paper points out that enhanced 4G business application experience occupies a dominant position, and all parties are actively exploring video applications based on enhanced mobile broadband.

In the operators' 2020 financial reports, China Mobile announced new applications such as 5G+4K+VR ultra-high-definition live broadcast, 5G ultra-high-definition full-screen video ringtones, 5G cloud games, and 5G new messages; China Telecom said it has launched 5G feature applications such as Tianyi Cloud Disk, Tianyi Ultra-High Definition, Video Ringtones, Tianyi Cloud VR, and Tianyi Cloud Games; China Unicom said that application scenarios represented by VR/AR games and high-definition 4K/8K videos are constantly being optimized.

In general, 5G innovative applications are still in the incubation period, and users are not very aware of 5G at present. However, the concept of "roads wait for cars, not cars wait for roads" has become a consensus in the industry. Therefore, this year's 5G construction will still maintain a "moderately advanced" rhythm.

The total 5G-related capital expenditure of the three major operators this year is expected to be 184.7 billion yuan, an increase of about 5% over last year's actual expenditure. Among them, China Mobile plans to spend 110 billion yuan on 5G-related capital expenditure this year, China Telecom plans to spend 39.7 billion yuan, and China Unicom plans to spend 35 billion yuan.

The China Academy of Information and Communications Technology report believes that innovative consumer applications with 5G characteristics may grow in scale between 2022 and 2023, and the scale growth period of 5G industry applications is expected to appear after 2023.

However, what exactly is the real killer application of 5G? This is a difficult question to predict. As Ericsson President Börje Ekholm said in an interview with the media, "5G is at a very important stage of development, but people often only realize the valuable applications after the fact. Just like in the 4G era, it is impossible to foresee what kind of killer applications will appear in advance."