2019 was hard but 2020 will be even harder – Huawei CEO

Record revenues, record profits and record smartphone shipments, but the US Entry List heavily impacted Huawei in the second half and 2020 is going to be tougher again.

US aggression, the coronavirus outbreak and OpenRAN are just three of the areas which were addressed as Huawei CEO Eric Xu unveiled the 2019 Annual Report, but the executive has also predicted ripples which turn into waves for everyone around the world should the on-going conflict between the US and China continue.

“We might see an endless flow of disastrous aftermath,” said Xu. “If that happens, not a single player in the global value chain can stay immune.”

As Xu pointed out, the Chinese Government is not simply going to sit back and do nothing while its telecoms champion is ‘slaughtered’ on the ‘chopping block’. Continued aggression against Huawei will see eventually see reciprocal actions against US firms which will impact everyone and anyone.

Although the financials do not necessarily paint a picture of panic, Xu might be considered the proverbial duck in water; calm and collected on the surface, but frantically paddling underneath fighting off the various challenges to Huawei’s success.

2019 saw revenues increase 19.1% year-on-year to $123 billion, profits climb 5.6% to roughly $9 billion and cash flow jumped 22.4% to $13.1 billion. Smartphone shipments exceeded 240 million across the year, while 15.3% of its 2019 revenue, some $18.9 billion, was invested into R&D.

Looking specifically at the Carrier Business Group, revenues grew 3.8% year-on-year to roughly $41.8 billion. Huawei has signed 90 commercial 5G contracts around the world to date and shipped more than 600,000 5G base stations. These numbers say one story but digging deeper tells another tale.

Some longstanding customers, who Huawei worked with for 2G, 3G and 4G, have chosen to go elsewhere for 5G. TDC in Denmark and Vodafone in Australia are two examples, though it remains to be seen how much of an impact the US will have on Huawei’s fortunes.

Huawei was added to the US Entity List, banning US companies from working with it, during May. For the first six months of the year, Huawei was flying according to Xu, though US aggression severely dented the financials. The business recovered during the fourth quarter, though Xu suggested as much as $10 billion in revenue was lost due to the on-going friction with the US.

The most immediate impact from the US Entity List was to the smartphone business, as while shipments grew attractively in 2019, the bulk of these fortunes were domestic. Xu highlighted that Huawei has no intention of scaling back international operations for its Consumer Business Group, which accounts for 54% of total revenues, but continued success depends on the adoption of Huawei Mobile Services (HMS).

Launched towards the end of 2019, HMS is the ecosystem to replace Google. It will act as the supporting mechanism for developers as well as the marketplace to interact with users. The smartphone is only as good as the applications which can be installed on it, therefore the Huawei smartphone fortunes are almost 100% dependent on the success of this initiative.

This is a direct consequence for Huawei, but the negative impacts can flow the other direction also. A report from Boston Consulting Group (BCG), sponsored by the Semiconductor Industry Association (SIA), suggested restrictions to Chinese trade could result in the US losing its leadership position in the semiconductor industry.

As Xu points out, if Huawei and other Chinese companies are not able to work with US firms, Chinese alternatives might well emerge. It could reduce the influence of US semiconductor companies on the global industry and offer accelerated development of the Chinese challengers. And thanks to ‘Made in China 2025’ strategy from the Chinese Government, there would be plenty of support for growth in this segment.

But these challenges might only be the tip of the iceberg.

In 2019, Huawei only had to deal with the US Entity List, and the subsequent bans, for seven months, but it will have to become accustomed to these discomforts for the full 12 months in 2020. Add in the complications caused by the COVID-19 outbreak, the prospect of Chinese retaliation and potential competition emerging in the Open RAN ecosystem, and the next year could be somewhat turbulent.

Aside from the political conflict escalating, the coronavirus is another very obvious challenge for the business to negotiate.

From a supply chain angle, the most obvious complication is dealing with international suppliers. In China, Huawei suggests the manufacturing capabilities are now close to 100% though the risk which is being faced is to do with the rest of the world. The coronavirus is spreading rapidly outside of China, especially in Europe and North America, which could impact the operations of suppliers. Huawei’s manufacturing operations might be close to 100%, but it is as reliant on external factors for components and materials as anyone else.

Another challenge worth considering are the most immediate concerns of customers. In the Carrier Business Group, the attention of telcos are drawn more towards improving network resilience as opposed to aggressive deployment of 5G. Huawei SVP Victor Zhang highlighted deployments have not stopped, but more work is being done to improve the reliability of broadband and 4G networks as coronavirus causes societal changes, which might detract from the pace of deployment in the 5G world.

Looking at OpenRAN, again this is another challenge, but one which the Huawei team is not overly concerned about in the short-term. These products should not be considered market-ready for the moment, so will not have a material impact of the commercial prospects of Huawei in the foreseeable future.

Perhaps another twist to consider is the parallel deployment of Single RAN and OpenRAN products. Xu likened this dynamic to the idea of General Purpose (GP) and Specialised Purpose computing (SP), where GP was supposed to threaten the existence of SP. In this segment, usecases have emerged to satisfy the demands of both, which Xu believes will be the same result in the RAN world.

Merged altogether, the telecoms infrastructure leader has an interesting 12 months on its hands. Huawei is a company which has been and will continue to be successful, but the hurdles to overcome are starting to become larger and more frequent. 2019 might have been a tough year for the team to negotiate, but 2020 promises to be much more challenging.

Here’s the whole annual report press conference for anyone with an hour and a half of self-isolation to kill.

Italy proves problem child for Three Europe with 12% subs decline

Aside from Italy, subscriptions grew slightly across the Three European footprint, though a 17% increase in total revenues should be taken with a pinch of salt.

Any increase in revenues should not be snubbed of course, but what is worth noting is 2019 was the first year Three Europe felt the benefits from the additional 50% share in Wind Tre which reported solid results in the second half of 2019. The pre-existing businesses seemingly had somewhat of a difficult year.

UK Italy Sweden Denmark Austria Ireland
Revenue £2.4bn €4.9bn SEK6.6bn DKK2.2bn €867mn €603mn
Year-on-year -2% -1% -5% 0% -2% +2%
Margin £1.4bn €3.5bn SEK3.9bn DKK1.7bn €622mn €454mn
Year-on-year -3% -3% -4% +1% 0% +3%
Customers 13.7mn 23.8mn 2.1mn 1.5mn 3.7mn 3.9mn
Year-on-year +3.7% -12.2% +5% +7% 0% +8.3%
ARPU £17.79 €10.72 SEK283.22 DKK124.43 €20.62 €19.28
Year-on-year -2% -6% -6% -3% -2% -4%

Across the European footprint, total revenues increased to roughly €10.4 billion, though this is largely down to the increase stake in the Italian business. As you can see from the table above, 2019 proved to be a mixed bag for Three.

The active customer base, as of December 31, stood at 40.6 million, a 5% decrease from the same point in 2018. Aggressive competition in the Italian market was mostly to blame, though net ARPU and net AMPU across the Group also decreased by 8% and 7% to €12.94 and €11.04 respectively.

Perhaps more than anything else, these figures demonstrate the important of a diversified business and the convergence business model. Not only will these elements build customer loyalty, but ARPU can be increased with more services being offered.

One of the more common trends across the developed telecommunications markets around the world is the decreasing price of data per GB, while more customers are shifting towards unlimited data tariffs. These trends commoditise the data transmission segment but also erode profit margins.

Three is in somewhat of a difficult position, though it is certainly not alone, as many of the individual business units currently operate as a pure-play mobile telco. This looks to be a dangerous strategy to follow, as these trends are likely to accelerate rather than reverse.

There are initiatives in place to diversify revenues, Three UK is venturing into the world of fixed-wireless access (FWA), though the broadband market is already incredibly competitive. Others have also questioned the sustainability of a FWA market when fibre deployments are accelerating, and pricing also has to be very measured. Three UK currently charges £27 a month for 4G FWA, which is competitive.

Trends influencing the European business would perhaps suggest than more needs to be done to create added-value services into the mix. Content is a popular one for many telcos, though some are looking into areas such as financial services or digital security also. Partnerships are key, leaning on the expertise of other companies (Netflix or Disney+ for example) to reduce risk, and can offer recurring revenues for the telco who has the existing billing relationship with a customer.

These numbers should be considered very worrying for Three. The commoditisation of data is only going to be more aggressive as more data-intensive applications emerge and more elements of society are underpinned by digital, and it is incredibly likely more users will be paying less for data tariffs as competition inspires the race to the bottom.

Cloud becomes the golden child as Google reports yet more profit

When looking at the financial results of companies like Google, the question is not whether it has made money, but how much are the bank vaults overflowing.

Financial for the full year demonstrated slightly slowing growth, but few should worry about having to search the sofa for the pennies right now. Over the course of 2019, Google brought in $161.8 million, up 18.3% year-on-year, though it was YouTube and the Google Cloud business units as opposed to the core business which collected the plaudits from the management team.

“Revenues were 2.6 billion for the fourth quarter, up 53% year-over-year, driven by significant growth at GCP and ongoing strong growth and G Suite,” said Alphabet CFO Ruth Porat. “The growth rate of GCP was meaningfully higher than that of cloud overall. GCP growth was led by our infrastructure offerings and our data and analytics platform.”

Company Quarter Revenue (most recent) Year-on-year Growth
Google Cloud $2.6 billion 53%
Microsoft Intelligent Cloud $11.9 billion 27%
Amazon Web Services $9.9 billion 23%

Despite being a business unit which brings in an impressive $10 billion annually, it is impossible not to compare the performance of Google Cloud to AWS and Microsoft Azure. Google is realistically the only rival which can keep pace with the leading pair, though it does appear it is losing pace.

That said, the fortunes of the cloud are only beginning to be realised; this is a marathon not a sprint. Moving forward, the Google team believes strength in AI and software gives it an advantage to provide seamless experiences to users across multiple devices. There is also the blunt force approach to acquiring market share moving forward; Porat highlighted the objective is to triple the size of the cloud sales team.

Over at YouTube, the team is capitalising on the increasingly consumer appetite for video, though also what appears to be a more experimental attitude to subscription. YouTube TV is growing healthily at 2 million, while the core YouTube platform has more than 20 million music and premium paid subscribers.

This is positive momentum, though it will be interesting to see what impact partnerships have on these figures. Google is partnered with Verizon, forming a content option in its bundled products, though rivals are placing a much greater emphasis on these relationships, leaning on an already established link with the consumer, albeit sacrificing some profit in the process.

Perhaps these two business units demonstrate why Google is such an attractive company to investors and potential employees. The core business can do what it does, but Google is always searching for the next big idea. Google Cloud is arguably the most successful graduate of its ‘Moonshot Labs’ initiative, while YouTube is one of the biggest acquisition bargains at $1.65 billion in 2006. It now brings in more than $15 billion annually in ads sales.

During the earnings call, CEO Sundar Pichai pointed to some of the other investments which are absorbing the $26 billion annual R&D budget. Verily and Calico are linking together AI and cloud technologies to improve clinical trials, research, and drug development. Waymo is attempting to scale driverless vehicles in the US. Loon is another Moonshot graduate, endeavouring to stand on its own currently.

Google is one of the most interesting companies around, not only because it is a money-making machine, but the R&D business could produce some gems over the next few years.

2020: convergence, divestment, disappointment and political posturing

With 2020 drawing to a close, it’s only fair to have a look at how the industry has been shaped over the last few months, and what to expect in the build up to Mobile World Congress.

Although the headlines have been continually dominated by friction between the worlds’ two most dominant super-powers, there have been other trends to pay attention to. Here, we are going to dissect four of the trends we feel will make a mark over the coming months in the build up to Mobile World Congress in Barcelona, most notably:

  • Continued political posturing as decision day looms large
  • Convergence as the new status quo for telecom operators
  • 5G delivers, but delivers very poorly
  • Telcos gradually hand their fate over to the money men

The Huawei white-noise will reach deafening levels

2019 has been a year defined by political conflict. Almost everywhere you look there is collateral damage from more extreme and absolutist politicians wielding the power afforded to them by public vote (or not in some cases). The concept of tolerance and compromise almost seems to have disappeared as bullying tactics and misleading statements are the go-to plays in politics.

In the telecoms industry, this political friction has been concentrated to the fate of Huawei. Huawei is somewhat of a proxy, representing the rise of China’s influence in the technology world and a loosening grip from the US. Some might believe the US is acting as the champion of the world, countering the espionage threat of China through its telco champion, but a lack of evidence presented to the industry will always undermine these claims.

And while the continued barrage of political propaganda, from both sides might we add, was stuttering towards intolerable at times, perhaps we should brace ourselves for an onslaught in the New Year.

Italy has recently made noises about greenlighting Huawei, Germany’s incumbents are already reliant on the firm and soon enough someone in the UK will have to make a concrete decision regarding the Supply Chain Review. These are three very influential nations and could dictate the fate of Huawei throughout the rest of the European bloc.

But final decisions have not yet been made.

In each of these markets, the telcos are chomping at the bit to drive forward with 5G deployment, but without the certainty of a Huawei decision only stuttering progress can be made. If these national economies are to compete in the digital economy, scaled 5G networks will need to be present soon enough; a decision needs to be made.

If a decision is on the horizon, expect some hardcore lobbying over the next couple of weeks, especially as we build towards the annual bonanza in Barcelona. The Huawei noise is perfectly poised to reach deafening levels.

Convergence is King

The idea of convergence, the bundling together of products and services into a single bill, is not new but it is starting to gather momentum.

It does seem like we have been talking about it for years, though it is only today the telcos have finally aligned all the relevant pieces to make a competent offer. This is a strategy which is expensive to develop, but the rewards do appear to be significant.

What is worth noting is that there are telcos who bought into the trend very early and are reaping the benefits today, Orange is a prime example. This forward-looking telco has been building towards the convergence dream for years and now looks as far away from the commoditised business model as possible.

This is a business which should be envied. It has a solid mobile and fixed business, a banking brand, fingers in the content pies and is even starting to make headway in areas like consumer security. Convergence is one reason for this as it has driven loyalty and trust through creating products which people want to buy and at a price which is tolerable.

Convergence works both ways. For the consumer, bundling two services into the same bill is cheaper in the long-run, and for the telco, it reduces churn, increases ARPU and creates opportunity to sell additional services. Theoretically, everyone benefits.

More telcos are driving towards the convergence dream, though some are not. What may emerge in the future, is a two-tiered telco industry (although it arguably already exists today). At the top, you have the telcos who have embraced convergence early, and at the bottom, the pure-play companies who believe there is nothing to the hype.

Convergence works. And those companies who have ignored it, will be the also-rans of the telco community.

Be surprised if people are happy with 5G

5G will be a lot of things, and above all else, we suspect it will be a disappointment.

This might sound incredibly negative and counter-intuitive, but it is being realistic. Today’s consumer is demanding, impatient and cash-conscious. 5G has been launched by numerous parties across the world, though the geographical footprints of these networks are minimal.

Realistically, the telcos have done an excellent job in delivering 4G connectivity. In most advanced nations, coverage is almost guaranteed, unless you are a farmer. Unfortunately for the telcos, this experience will count against them as we push into the 5G era, as the consumer will expect the same. Few will have been educated to understand that emulated the scale of 4G in 5G will take years to achieve.

This is a challenge the telcos will have to address over the next couple of months. Consumers will have to be upgraded to 5G tariffs, but they will not want to pay anything extra, irrelevant of the geographical coverage. Telcos might well have to introduce a premium on these tariffs to raise the funds to continue deployment, as the efficiency gains of 5G connectivity over 4G are highly unlikely to be enough to fund the required investments.

Enterprise customers will of course provide a lot of stimulus for the industry to drive forward with 5G deployment, though everyone in the industry should brace themselves for an unhappy consumer as the sparse 5G connectivity gets negative reviews.

Money men start to erode telco influence in telco industry

2019 has already seen numerous money men get more actively involved in the telco industry but it looks like this is only the tip of the iceberg.

Goldman Sachs bought CityFibre, Elliott Management has been wrestling for control of Telecom Italia and Brooking Infrastructure is hoovering up assets throughout the industry. These are only a few examples, but the financial and investment industry is looking much more attentively at telecoms.

But why?

Firstly, the consumer is increasingly showing a willing to spend more money on connectivity services and products. This sounds strange, but more families are upgrading to fibre, more users are taking up unlimited mobile tariffs and more products are embedded with connectivity. The consumer appetite looks attractive to these companies.

Secondly, governments are setting in place the right policies to encourage investment in connectivity infrastructure. Red-tape is being removing, ransom rents are being killed off, access to public infrastructure is being opened-up and government subsidies are becoming more common place. Return on investment for communications infrastructure is looking much more achievable.

Thirdly, the enterprise segment looks like it will be a cash-bonanza in the future. Digital is finally embedding itself in industry as more companies realise that digital-first is the only way to survive. This opens up huge potential for telcos to make more money from assets which once laid have incredibly life-spans.

Finally, the telcos need cash. The digital dream is one which is very expensive, and these are companies which have taken a beating over the last decade. Despite the promise in the future, the telco industry is a difficult one to make profitable today. This presents a bargain opportunity for the money men to engage the telcos who are desperate for cash injections to drive through 5G and fibre deployments.

As we have said before, 2019 saw a lot more engagement from the financial and investment community, though this is likely to accelerate over the coming months.

A bunch of telecoms predictions for 2019

It’s that time of year again and before we set about the food, booze and pressies with shameless abandon we decided to collate some predictions from the cognoscenti of our industry.

2019 will be the year of rhetoric – William Webb, Telecoms Consultant

A lot of talking, not much doing. Everyone will be talking about their 5G deployments but many will be trials, not many handsets will be available, and there will be many teething problems with initial deployments. With 5G taking up so much attention, the industry will not be looking at alternative business models, hetnet concepts, or pushing for mergers. Current trends will continue – more fibre will be laid, more wifi connectivity provided, data requirements will continue to grow. Oh, and academics will start to talk up 6G….

Fixed Wireless Access put the revenue back in 5GBengt Nordstrom, CEO of Northstream

Fixed Wireless Access (FWA) has evolved into a separate 5G use case, especially by Verizon in the US. Of all the suggested 5G use cases – including eMBB and mIoT – it is FWA that provides the most tangible revenue growth opportunity over the next five years, for both the US and in specific markets in Europe. Furthermore, operators can use their existing physical network assets and competencies for FWA. In 2019, FWA will emerge as a mainstream 5G revenue opportunity beyond the US, and particularly in Europe.

The 5G hype bubble will inevitably burst, revealing its true value – Jennifer Kyriakakis, VP of Marketing at Matrixx Software

As operators battle each other to out-hype their consumer 5G offerings, the breathless mania will surely run into the hard reality of the consumer marketplace. The roll-out of next-generation capabilities will be lengthier than consumers expected, device manufacturers will be slow to adopt the standards, and a whole host of other challenges to 5G enthusiasm will surely arise. While initially painful, this bursting of the hype bubble will provide the impetus necessary for operators to pivot away from today’s heavy focus on speed, coverage and price, and refocus their businesses on monetization opportunities for new and emerging technologies. By embracing innovation as a way to help pay for their substantial network investments in the near term, it will afford Telcos breathing room for the consumer ecosystem to catch-up and fully leverage the new capabilities that 5G will offer in the long run.

Smartphone market to revive in 2nd half with 5G volume – Wei Shi, Telecoms.com Intelligence Manager

The smartphone market has registered the first 4-quarter recession by the end of Q3 this year, and is likely to continue into the first half of the next. The market needs a stimulus for revival, and that should come from 5G. With the first commercial 5G chipset launch by Qualcomm, the enthusiastic smartphone makers, led by Samsung and the Chinese OEMs and, will ride on the wave of excitement to bring a strong line-up of 5G enabled products to the market in the second half of the year. This will provide another impetus for replacement in addition to the normal Galaxy-iPhone driven cycle. However most users who buy 5G phones will not be able to use 5G services overnight.

Telcos scale back efforts in content and media – Paolo Pescatore, Tech, Media and Telecoms Analyst

Cost of premium content rights continues to escalate. In part driven by new bidders such as the online giants. This will force telcos to rethink their current strategies towards investing in content. Some telcos like AT&T and Telefonica will continue to invest heavily. While others like BT will scale back their own ambitions and take a different approach in this landscape such as partnering more closely with providers like Amazon and Apple.

Amazon will acquire DAZN to create a global sports TV challenger – Ed Barton, Analyst at Ovum

Sport is the missing piece of the content puzzle for the tech giants – but not for much longer if Amazon continues to bid for distributors with existing rights deals, such as Fox’s regional sports networks in the US. By acquiring DAZN, Amazon would gain strong sports rights in key global markets including Germany and Japan. DAZN is committed to the sports market but might find the support and growth acceleration offered by Amazon – and its huge existing subscriber base – too alluring to resist.

We will finally get the message on RCS – Mary Clark, CMO of Synchronoss

2019 is actually going to be the year of carrier sponsored RCS – some 12 years or more since the technology was introduced. Between the launch of the operator led solution in Japan and the many other operators we are talking to about this around the world, I think by the end of 2019 we will see multiple launches of interoperable RCS messaging within countries and across countries, allowing for an improved customer experience as well as commerce.

Bringing people and things closer together with applications – Patrick Joggerst, CMO and EVP of Business Development for Ribbon Communications

2019 will be the breakout year for applications that combine people and things, communicating with each other, whether through voice activated commands (“Alexa, call Mum”), or messaging alerts (“A stranger is on your doorstep.”) The lines will blur and tremendous value will be created when companies design applications, connected on secure networks, that make it as easy to develop a relationship with your smart car, smart home, or smart campus as it is to develop a relationship with human beings. The impact will be substantial and meaningful, with applications that leverage sensors to help us age at home more safely, to get to and from work more conveniently, and to generally reduce the “friction” in life that can lead to exhaustion and despair. Look for major changes to the contact center industry, as virtual and human assistants help millions of people navigate this brave, new hyperconnected world, and look for value creation in securing communications throughout.

Rise of SIM-only contracts could be bad news for operators – Kevin Gillan, Europe MD at SquareTrade

Expect to see the slump in smartphone sales continue, and subscribers increasingly turn to SIM-only contracts in 2019. Operators will need to think carefully about alternative revenue sources to combat the unavoidable slump in contract sales. Additional services such as music, TV or device insurance that will retain customers and improve subscriber engagement, while driving new revenue, will be critical.

Operators fully embrace eSIM for devices and the IoT- Bengt Nordstrom, CEO of Northstream

After years of concern about the impact on their businesses, operators are coming to realise the considerable benefits of eSIM technology. These include simpler provisioning, reduced logistic costs and lower barriers for new use cases. Thanks to the rising number of eSIM use cases plus the launch of major handsets equipped with GSMA-based eSIMs, 2019 will be the year that operators in Europe and North America properly embrace eSIM for both handsets and IoT use cases.

The first sixth/seventh play bundle – Paolo Pescatore, Tech, Media and Telecoms Analyst

Most converged telcos already offer a portfolio of multiplay services including fixed line broadband and pay TV. These telcos include the likes of Deutsche Telekom, Comcast, Orange, and Telefonica. Expect these providers to launch the first sixth/seventh play bundle. This will consist of but not limited to other services such as banking, financial services, utility services and other connected services. Orange is likely to lead the race with its march into financial services.

Microsoft is to finish 2019 as the world’s most valuable company – Wei Shi, Telecoms.com Intelligence Manager

Microsoft has been delivering stellar performances in recent quarters, and has weathered the market gloom better than its main competitors. The strategy shift to becoming a platform and to focusing on cloud and gaming will continue to power its resurgence. Meanwhile, its main competitors on the top of the world’s most valuable company table are seeing their share prices being depressed for different reasons. Apple’s overreliance on iPhone makes it vulnerable when the market sniffs weakness in the shipment of its latest products; Amazon’s AWS is growing slower than Microsoft’s Azure; Alphabet is still a one-trick pony: advertising through Google, which continues to throw the company into troubles. As a matter of fact, Microsoft did briefly become the most valuable company in late November. Next time this crossover happens it may last longer.

Now that they’ve got to actually do it everyone gets bored of 5G and starts banging on about 6G – Scott Bicheno, Telecoms.com Editor

So 5G just ended up being about capacity, efficiency and industrial applications. How boring is that? Once the first couple of 5G conversational gambits at MWC fall flat, people will soon realise it’s much more fun to focus on more distant technology, about which they can make all sorts of utopian predictions without fear of being called out. There will be talk of a wireless neural network connecting everyone and everything to a hive mind overseen by benign artificial super intelligence. What they won’t say is that the ultimate aim of 6G will be to erase all traces of individuality in order to create a global AR/VR Borg that will combine Chinese social credit, American cultural puritanism and European imperiousness to free us all from the burdens of disappointment, inconvenience and choice. Happy New Year!

Vodafone announces 2019 commercial launch and 1k 5G sites by 2020

Vodafone has confirmed it will be ready to hit the 5G on-switch as soon as devices are available on the market, though only in Manchester in the first instance.

Speaking at the gloriously named Future Ready press conference in the telcos Newbury HQ, CTO Scott Petty confirmed the team will be ready for a commercial launch in 2019, though whether the devices will be available is another matter. Having launched in seven urban and rural locations over 2019, Vodafone will have 1,000 5G sites live by 2020 as the beast scales.

“Next year we’ll be launching in rural areas where there is great data growth based on innovation in those areas,” said Petty. “For instance, Cornwall and the Lake District will have 5G in 2019 and not just London, Manchester, Liverpool, Birmingham.”

It’s unsurprising the tech hubs will be getting the 5G euphoria first, though the rural focus is an interesting one. Few rural communities have fast-tracked to the front of the queue with any technology breakthrough, though Petty highlighted such experiments are important in building the 5G business case. It’s not just about autonomous vehicles, smart grids or real-time business analytics, what about agricultural IoT (the connected cow made an appearance at the event) and fixed wireless access? These are use cases which can be validated in Cornwall and the Lake District, two regions which have been identified as rural hot spots for data activity.

Vodafone Cow

IoT is clearly a massive driver for the business, the breadth and scale of the IoT business was pointed to unsubtly several times throughout the day, with the team claiming it has the biggest and fastest growing IoT business worldwide. 70 million ‘things’ are already connected to the network, a number which is set to increase as Vodafone continues to engage its sizeable enterprise business customer base.

With EE declaring its 5G network would be up and running during 2019, it was only going to be a matter of time before Vodafone got in on the act. But before we get too excited, we’ll have to wait for the devices to hit the market.

“You will see some announcements around MWC from Android manufacturers with their own silicon,” said Petty, hinting perhaps at Samsung and Huawei.

LG and Motorola are seemingly going to be the first manufacturers to launch in mid-2019, though Petty is looking more towards end-2019 and 2020 for scalable launches to the mass market. As it stands, there is still a lot of work to do. Having travelled to the US to visit currently unnamed manufacturers, Petty highlighted the devices are still too big, 2-3 times the size of current devices, with the battery and antennas proving to be the difficulties.

This is nothing to be too shocked about, new spectrum means new problems with the antennas and getting them small enough was always going to be a challenge. The devices are also far too demanding on the battery, again unsurprising. Petty highlighted when it came to MIMO panels, it took the industry 12 months to get a functional product down from 60kg to a more suitable 20kg. The technology works, it’s just shrinking it to a practical size now.

Of course what is worth noting is this isn’t just smartphones but also network equipment availability. 5G specifications were only finalised last year so there is a race to the finish line for the network vendors, all excluding ZTE which does not feature in the Vodafone footprint whatsoever.

Scott Petty

With the 5G dawn just about to break, Vodafone looks to be in a promising position. Redstream, its fully integrated voice, data, optical and IOT network, is up and running with 4000 access nodes and 1500 pops already deployed, while more customers and services are being migrated across. This is a key pillar of the 5G strategy, as Petty highlighted it allows the team to switch off the troublesome legacy equipment and networks, while also retiring legacy products. 80 have already been sent to pasture.

“Redstream is the foundation building block for everything we need for 5G,” said Petty.

Elsewhere, a new digital exchange layer, which allows people to separate the digital services from the underlying billing systems, has been developed allowing the team to build highly flexible, agile technologies and services, adding new channels and services rapidly. Alongside the progression adoption of Devops throughout the business, the team can move from quarterly to monthly and weekly software updates, with the option of daily updates being the holy grail.

With the 5G promise so close to becoming a reality, some of the European telcos are doing their best to wrong stereotypes. With Vodafone UK patiently hovering around the on-switch, waiting for the emergence of compatible devices, some might be fooled into believing the UK is a 5G leader.