May 28 2019
Telstra has announced its first significant commercial move into the 5G space, offering eligible customers free access to Telstra’s 5G network for 12 months from June. According to industry research firm IBISWorld, the decision will intensify competition in the already competitive telecommunications sector.
Senior Industry Analyst Liam Harrison says new 5G services are expected to be a strong source of potential revenue growth over the next five years. The Wireless Telecommunications Carriers industry is expected to be valued at $24 billion in 2018-19.
Vodafone has been fairly quiet on the 5G front, with plans to have their 5G network go live in 2020. Optus has already begun activating 5G sites in preparation for connecting to consumers. However, Mr Harrison says that rather than challenge Telstra directly, Optus appears to be going for a different strategy.
“So far Optus has not revealed its 5G mobile plans, instead focusing on using its 5G spectrum to offer 5G fixed wireless broadband plans. This will act in direct competition to the NBN, and is expected to offer comparable speeds and latency to current NBN connections,” he says.
- 5G connections can reach speeds in excess of 1gbps, ten times the maximum speed of most consumer NBN connections.
- 5G fixed wireless connections are likely to be more reliable than many NBN connections, and could capture broadband market share and future 5G handset share, as more individuals may choose to bundle their broadband and mobile plans.
Mr Harrison also says that the rejection of the TPG-Vodafone merger earlier this month by the ACCC appears to have boosted the confidence of Telstra and Optus in the 5G market.
“Telstra’s first move into the 5G market could pay significant dividends if successful, but the looming threat of Optus’ 5G broadband offerings could dampen potential future growth. TPG is currently adamant that it will not invest further in a mobile network, due to the ban on using Huawei equipment in constructing 5G infrastructure, which appears unlikely to be reversed in the near future” says Mr Harrison.
TPG and Vodafone intend to appeal the rejection of the merger, and the outcome of this appeal will further influence the 5G market.
Mr Harrison says that the recent election result could also influence the industry. “The shock election victory of the Coalition has significantly reduced the chance of a write-down of the NBN, which would allow for lower wholesale broadband prices and reduce pressure on telco margins,” he says.
As Australia’s major telecommunications providers continue to roll out their strategies, the war for the 5G market has begun.
IBISWorld Industry Reports used in this release:
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