5G payback period MENA -build it and they will come?

presentation of paper at ITS MENA in Aswan Feb.19. Looking at the impact of spectrum fees and infrastructure sharing in the MENA region for 5G deployment.

It questions if the proposed incremental revenue (5% pa) from 5G, makes wide area deployment of 5G commercially attractive for MNOs, even if there are large economic benefits to the wider economy. Spectrum auction/admin fees can further undermine the business case and represent perhaps 25% of deployment costs potentially.

This simple payback analysis is meant to offer a starting point to examine these issues in a transparent way to allow regulators to focus on the key issues that might make the difference between only a few % of cells being 5G, or national coverage (or the time taken to go between these points).

A common shared network or national roaming is likely to be the only way to provide coverage in rural areas, i.e. for the last 5 to 10% of population, and should be considered as competition seems to have reached the limits of what it will provide in terms of national coverage.

1. ITS ASWAN 2019 2
nd
MENA Regional
ITS Conference
18 - 21 February 2019ASWAN - EGYPT Regional 5G Road-Map
https://www.slideshare.net/RobertoErcole/5g-deployment-costs-mena-region
Accelerating 5G Deployment
Roberto Ercole, Consultant
[email protected]

2. ITS ASWAN 2019 https://ec.europa.eu/digital-single-market/en/news/5g-deployment-could-bring-millions-jobs-and-billions-euros-benefits-study-finds
Source: EC Study 2016
Looks like for every $ invested you get $3
back by 2025 and then it continues to
grow.
But how much do the operators who make
the investments get?
EU Study -€113 bn annual benefit in 2025

3. ITS ASWAN 2019 But what will operators get?
•Macro economic analysis won’t help if investors can’t make
money –i.e. mobile;
•Current revenue squeeze from OTTs makes for uncertainty;
•Much more scepticism from mobile opcos now than before;
•Spectrum fees around 20% of costs (using KSA benchmark)
•Payback without spectrum fee 5 to 7 years (exclude Iraq)
•Payback with Spectrum fee 6 to 9 years (exclude Iraq)
•Iraq lack of 4G penetration could add $600m to costs

4. ITS ASWAN 2019 Cost of wide area 5G high –need to upgrade existing sites to 5G, densify urban/suburban areas,
backhaul, and core network. That’s a lot of sites and expensive.

5. ITS ASWAN 2019 5
What have others found? -£42bn wide area UK
Source EPSRC –Judge Business School etc. 2016
https://www.itrc.org.uk/wp-content/PDFs/Exploring-costs-of-5G.pdf
EU study gives @ €7bn for UK
DCMS Infrastructure Review suggests £7/8 bn

6. ITS ASWAN 2019 $1,001
$111
$1,265
$847
$379
$2,500
$494
$1,007
$590
$495
$229
$1,122
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Millions
cost $ with spectrum fee*
Results from this paper –spectrum fees signifcant

7. ITS ASWAN 2019 Opcos will likely shy away from much over 5 years?

8. ITS ASWAN 2019 country Hotspot + dense urban
+ urban (km
2
)
% total landmassPopulation density
per km
2
UK 2,399 0.986% 263
Sweden 282 0.063% 22
Hungary 165 0.177% 105
Italy 2,039 0.66% 196
If payback too long what we get is very limited hotspot coverage –
and reduced benefits
•Egypt –total populated area 77,000 km
2
around 8% landmass
•41 million live in less than 3% landmass
•Danger is hotspot island to dense urban only less than 1% of
landmass –but what impact will this have on benefits and
revenues?

9. ITS ASWAN 2019 How much can rural sharing save?
•Depends on number of operators and demographics
•Assume 50% sites are rural:
Number of
opcos
5G Capex saving
With rural single network
5 40%
4 37.5%
3 33%
Impact on payback for Egypt with 3 opcos
With spectrum fee
Payback goes from 7.0 to 4.9 years
Egypt likely has much more rural areas that can be served by a single network

10. ITS ASWAN 2019 Spectrum Benchmarking (for commercial mobile)
*** Source: Policy Tracker** including 800 and 2.6 bands under consultation
*assumes 3.6-3.8 available if needed.

11. ITS ASWAN 2019 2
nd
MENA Regional
ITS Conference
18 - 21 February 2019ASWAN - EGYPT Background Slides

12. ITS ASWAN 2019 Cost Model –based on mast sites
•Upgrade all sites –Algeria 18,000 sites at £15k
•Densify network for extra capacity using higher frequency
bands 18,000 x £15.8k
•Add 10% more macros to improve coverage 1,800 x £58,900
•Add more backhaul capacity 25% x GDP modifier (0.1)
•Fibre to small cells 18,000 x 25% x GDP modifier (0.1)
•Add 10% for core network upgrade

13. ITS ASWAN 2019 Revenue Model + Payback
•Use Average Revenue per Subscriber x population to give
annual revenue. ARPU assumed all revenue divided per sub.
•Assume 5% CAGR uplift from 5G (source Ericsson)
•Work out payback based on cost and revenue
•Add in spectrum fee assuming KSA award in January -$100m
for 100 MHz (assume 500 MHz needed)

14. ITS ASWAN 2019 4G % pops.
coverage 2014 2015 2016 2017
Algeria 0% 0% 3.62%30.49%
Iraq 0 0 0 0
Jordan 80% 80% 87% 90%
Kuwait 96.60% 98% 99.60%
Morocco 0 45.44% 68% 93%
Oman 76% 86% 88.77%92.10%
Qatar 58% 95% 99.04%99.50%
Saudi Arabia82% 85% 88% 90%
Tunisia 0 0 73% 87%
UAE 85% 95.29%99.60%99.64%
Operators still haven’t rolled out much 4G in many countries
Iraq has no 4G coverage yet
Egypt has on 61% population coverage 4G compared
To @99% for 3G.

15. ITS ASWAN 2019 pops (m)countrytowers area km
2
towers
per km
2
people
per
tower
pop
density
1.425 Bahrain 1,500 758 1.979 950 1,880
4.05 Kuwait 6,800 17,818 0.382 596 227
2.57 Qatar 5,000 11,586 0.432 514 222
9.27 UAE 13,000 83,600 0.156 713 111
9.46 Jordan 7,149 89,342 0.080 1,323 106
95.7 Egypt 22,704 1,002,000 0.023 4,215 96
37.2 Iraq 14,242 435,244 0.033 2,612 85
35.3 Morocco 19,054 446,550 0.043 1,853 79
11.4 Tunisia 4,083 163,610 0.025 2,792 70
40.61 Algeria 18,000 2,381,741 0.008 2,256 17
32.3 KSA 35,663 2,149,690 0.017 906 15
4.42 Oman 10,000 309,500 0.032 442 14

16. ITS ASWAN 2019 Jordon, 99%
Source: ITU -“ICT Indicators Database” (2017)
(Note! not all country territories shown in full)
Tunisia, 99%
UAE,
100%
Oman
96%
Lower bands such as 700/800 MHz
vital to help promote wide area coverage