IDC: On telcos and 5G during the pandemic

In the last few months, telco services have played a major role in keeping people connected, productive, and informed about the pandemic situation during the lockdown period. Enterprise IT News has a chat with IDC ASEAN’s Senior Research Manager, Muhammad Zaim Halilul Rahuman, who zooms into the details of telco activity.

EITN: How does COVID-19 affect the usage/spending of telecommunications during MCO?

Zaim: The pandemic situation and the strict lockdown measures imposed by government to curb the COVID-19 has transformed people’s day-to-day activities. People has started to work from home (WFH) and for those students, who can’t attend school has begun to do schooling from home, and Internet access has been the key element to enable the WFH situation. Due to this transformation, there has been accelerated geographical shift of network traffic from business / office regions to residential areas. Furthermore, MCMC has reported that the usage of Internet has spiked up 23.5-percent higher during the first week of MCO period because people are heavily depending on Internet, not only for work-related activities, but also for leisure activities such as online video streaming and video-gaming.

IDC predicts that telco total spending will reduce 8.2-percent in 2020 compared to total spending in 2019 mainly due to the impact on mobile voice and data revenue. The spending of prepaid mobile users will decrease since most of the prepaid subscribers are connected to their fixed broadband at home and at the same time, they are leveraging on the complimentary daily 1GB data given by telco as part of the government initiative to support the people during this difficult period. It is highly evident that, people are not only able to freely move around within the country, but they are also forbidden from travelling abroad. As a result of this situation, there is a sharp decline in spending on international roaming for both voice and data services due to the closing of the border and travel restriction by Malaysian government, which prohibit any Malaysian and foreigners to travel in & out of the country.The spending on fixed line services such as Internet access & IPVPN still showing positive growth despite of the pandemic situation since the subscribers are relying on this connectivity modes to get them connected to the Internet and for enterprise to ensure their organisation system are available for remote access for their employees.

EITN: Will the revenue of Telco rebound as there is drastic decrease in mobile roaming due to the border closing in ASEAN countries?

Zaim: The highly impacted segment of telco products during the COVID-19 period is the international roaming revenue, and it has been affected, primarily due to the travel restriction reigned by the Malaysian government. The second and third wave of infections that is happening around the world, will further delay the re-opening of international border to allow people traveling again and this will have pro-longed effect on international roaming revenue for the telco. Telco will be focusing on other segment such as digital transformation and take this opportunity to position themselves as facilitator of stability and business continuity, especially for the Small-Medium Enterprises (SME).

EITN: Should businesses such as as Transportation, F&B and Manufacturing find a new way to operate?

Zaim: Industry sectors such as transportation, hospitality and manufacturing industries are severely hit by the COVID-19 crisis. The MCO – lockdown has left many enterprises cash strapped and unable to pay their suppliers, including telcos. As a result, enterprises will cancel or postpone their future projects in their planning phase.

COVID-19 will result in structural changes in many sectors in which the impact of winding down operations, changing business demand, and business models require unprecedented ongoing restructuring programs. On the other hand, IDC expects to see innovation by enterprises that will leverage technologies such as Artificial Intelligence (AI), Machine Learning (ML), analytics, and robotics to cope with the challenges of the next normal.

For example, manufacturing companies will use location-based data in conjunction with analytics to trace the distance between floor workers with embedded warning systems to comply with regulations. After restrictions have been eased, many retail, gastronomy, cosmetology, and other physical stores will require digital platforms and sensor-based solutions that help them reduce the concentration of visitors in their establishments. Stores will require automatic scheduling platforms to manage customer visits and IoT solutions to ensure that social distancing is maintained.

EITN: Should spectrum for 5G be allocated soon? Who in your opinion should be granted spectrum license to operate, and why?

Zaim: Initially, before the COVID-19 situation, 2020 was supposed to be 5G’s big year. Telco has been doing 5G Proof-of-Concept and trial with telecom equipment vendors to show their eagerness to MCMC in rolling out the 5G services but at the same time awaiting MCMC to announce the spectrum allocation for this 5G service.

Allocation of the spectrum for 5G has been delayed due to the current crisis but it will be awarded as soon as more application or use cases for 5G services are emerging from the key industries players. Enterprises are keen on exploring automation with IoT and migration into digital infrastructure, and this will push for demand of 5G services from enterprises.

The 5G spectrum should be granted to a consortium to build and operate the 5G infrastructure in order to reduce the total cost of ownership. Telcos will reap the benefit out of the infrastructure sharing concept for 5G since it will significantly reduce their CAPEX for 5G investment since it is predominantly known that 5G network requires more base stations which directly increase the cost of 5G deployment and maintenance. Not only that, infrastructure sharing will translate to less tower / base stations installed in the coverage sites and it provide better aesthetic value to urban areas.

EITN: In light of the pandemic and economy having undergone what is has, what are the requirements for a 5G License operator during this stressful times,  and what are the objectives that they should fulfil?

Zaim: The COVID-19 pandemic has caused an uncertain economic situation, not only for Malaysia but for the whole world. The second and third wave of the COVID-19 has further worsen the situation and the real impact of this crisis will be only known in the coming months.

The 5G license awardee should be careful in investing into 5G network infrastructure because it involves high CAPEX and the telco might find themselves in financially distressed situation if they do not be careful in their spending for deployment of 5G network. Infrastructure sharing via partnering with other telco or forming a consortium will give them better total cost ownership perspective and help them expand the 5G network into bigger area in a faster rate.

The telco should be targeting the area for 5G deployment where they could get better return-of-investment (ROI) by focusing on urban, business and industrial zones. Furthermore, telco should explore and identify the use cases of 5G that they could propose to their enterprise clients as part of total business solution and to help their client to adapt to next normal, while ensuring their business continuity regardless any circumstances.

EITN: Can you share comment about the latest announcement by the communications minister about a series of digital infrastructure labs from 13 July till 14 August?

Zaim: MCMC will be organizing the series of digital infrastructure labs and this lab will be the platform to revise and furnish a comprehensive national digital infrastructure development plan which includes the demand of the next normal environment.

The Communication and Multimedia ministry is playing a vital role in ensuring the national digital infrastructure development plan is in-line with the current digital need and including the industry players to contribute into discussion of this digital framework would lead to completion of an integrated national infrastructure program for the country.