We keep talking about 5G, but do you really understand the 5G market? What is the current situation?

2020 is a milestone in the development of China's communications industry. As the final year of the 13th Five-Year Plan, the development of China's communications industry in the past five years has been remarkable, especially the rapid advancement of 5G deployment in 2020, which has made China the world's largest and fastest-growing 5G market. According to data provided by the Ministry of Industry and Information Technology, as of October 2020, China had completed the 5G base station construction target for that year ahead of schedule, with 500,000 new base stations built. Facing the start of the 14th Five-Year Plan, the Chinese government is also intensively planning development goals for the next period of time. Although the overall rules of the communications market are still moving in a more competitive direction, geopolitics and interest groups are interfering with this increasingly strategic market. The reversal of network neutrality rules and the suppression of Huawei will continue to have a profound impact on the future of the communications industry.

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In the global market, Ericsson has become the most popular mobile communications equipment manufacturer. Against the backdrop of the US-led comprehensive crackdown on Chinese companies, Ericsson has received a large number of orders transferred from Huawei, becoming the communications equipment company with the largest number of 5G orders in the world. At the same time, Ericsson is also stepping up efforts to improve technology with operators and partners such as Qualcomm to consolidate its dominant position. With the deployment of 5G around the world and the increasing requirements of various countries for communications infrastructure, the global optical fiber and cable market is gradually recovering from the impact of the epidemic and is expected to grow by 7% in 2021.

Brazil used to be an important market for Chinese telecommunications companies in Latin America. With a large population, high population concentration, and continuously increasing penetration rates of 4G and fixed broadband, Brazil has good conditions for developing advanced communications technologies. However, the continued weakness of the Brazilian economy since 2014 has hurt the development of the communications market. As the country with the second highest number of confirmed cases in the world, the epidemic will bring greater pressure to Brazil's economic and industrial development. France is a highly mature market with high user coverage and a solid position of mainstream operators. Under the current circumstances, the main opportunity in the French market lies in its relatively backward fiber optic process. In February this year, the authorities set a goal of achieving 100% fiber optic access by 2025. But whether Chinese companies can seize this opportunity depends largely on the French government's attitude towards the so-called "China threat."

Since 2018, the performance levels of mobile communications in Brazil and France have gradually declined. In an environment where 5G technology deployment is slow and market competition is intensifying, the overall reduction in communication charges has led to an overall decline in ARPU. By the second quarter of 2020, the ARPUs of Brazil and France were US$4.5 and US$19, respectively, down US$1.4 and US$3.3 from the first quarter of 2018. At the level of mainstream operators, the ARPU of operators in the two countries has also shown an overall downward trend. It is worth noting that the ARPUs of the weak operators Free Mobile and Oi are significantly lower than the average level of the two countries. In terms of EBITDA, Brazilian operators have been significantly impacted by the COVID-19 pandemic. Judging from the EBITDA data in the second quarter of 2020, the revenues of mainstream operators in Brazil have declined across the board, with Oi's EBITDA falling by as much as 40%.

China's communications industry is still facing tremendous pressure from the United States. In October, some countries continued to support the so-called "Clean Network" plan of the United States, publicly prohibiting Chinese communications equipment companies from participating in their own communications network deployment projects. Considering that the United States' tough stance on China has become a domestic consensus, the recent US election, which is in the midst of fierce controversy, is not expected to have a significant positive impact on China's communications industry. On the other hand, with the rapid increase in newly confirmed cases in Europe and the United States since September, the "second round" of the epidemic has arrived, triggering a new round of "city lockdown" measures in some European countries. Although the intensity of this round of city lockdowns is far less than that in May, it will also have a certain negative impact on the economy and various industries.

At present, the main risks are: 1. The United States is trying to create divisions and "iron curtains" in the global communications and Internet fields, and Chinese companies may be further restricted. 2. Although the results of the US election are controversial, Biden's coming to power is basically a foregone conclusion, which will bring certain uncertainties to the future US technology policy toward China. However, considering Biden's obvious tendency to strengthen the US alliance, the US containment of China may be more severe in the future. 3. The "second round" of the new crown epidemic has been very significant, causing many countries to restart the "lockdown" policy. Although the epidemic has limited negative impact on the global communications industry and may even have some positive impacts, the epidemic may delay the deployment of new technologies in various countries, resulting in the export of related products or the progress of projects being slower than expected.