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Telstra 5G Plans Facing Hurdles And Potential Losses

Telstra chief executive Andy Penn who is struggling to grow revenues and resorted to sacking staff and slashing staff incentives may now have another problem.

After hyping 5G to mask the problems at Telstra, Credit Suisse analyst Randy Abrams has told a Hong Kong Conference that the relentless efforts by Penn to sell the benefits of the shift from 4G to 5G are in stark contrast to some of his global peers.

He claims that at the recent Mobile World Congress in Barcelona this year. “Everyone in the room was excited about 5G – except the telcos,”.

He claims that the technology has been “over hyped” and that carriers like Telstra are going to have to take a capital expenditure hit without any certainty around revenues that may or may not flow from 5G.

He claims While 5G will deliver a meaningful change in technology – drastically increasing total data capacity and download speeds there is no certainty that consumers will actually buy into the technology especially as many are happy with their 4G offering.

Another issue is that 5G handsets are going to be expensive and Telstra is not going to get a return on their infrastructure investment if only early adopters take to the 5G service. At a business level 5G is going to have to compete with the NBN.

Abrams claims that Andy Penn’s excitement over 5G is not matched by other carriers.

The Financial Review said Whereas 4G was a huge step forward because it allowed consumers to watch video on their phones, the key applications for 5G right now are about making things that already work on 4G work a little better.

“All the operators are struggling with finding a mass-market application to the same extent that video was a clear application that absolutely 100 per cent of us need,” says Colin McCallum, Credit Suisse’s head of telecommunications research for Asia Pacific.

Telstra recently outlined plans to have 5G handsets in the hands of customers within the next six months, with the telco’s priority to become the dominant 5G mobile player in Australia.

Singtel-owned Optus launched a 5G broadband service last month.

Colin McCallum, Credit Suisse’s head of telecommunications research for Asia Pacific. said “4G technology was a very, very good technology for telcos and consumers.

He claims that carriers like Telstra are facing a major dilemma as the rollout of the 5G standard will involve building a much denser network with more base stations, which will involve a substantial capital spend.

“So, we’ve got capex that is quite high, but we’ve got a revenue opportunity that isn’t that clear,” Mr McCallum said.

“But the (equipment) vendors want to hype the revenue opportunity because we’ve not seen very strong applications at this point.”

One bright spot for telcos is the gaming market, which is approximately two million users in Australia and the announcement by Google this month of a new cloud-based service called Stadia that lets players stream video games from the cloud to their smartphones, tablets or computers using a Chrome browser.

Telstra chief executive Andy Penn last month told The Australian that he expected consumers to pick up 5G smartphones once they hit the market.

“I think 5G will ultimately replace existing technology … our 4G services will also benefit in the short term as the early adopters, who tend to be bigger data users, go to 5G,” Mr Penn said at the time.

 

One analysts told ChannelNews “That is wishful thinking by Penn. He has serious problems and is masking issues by hyping 5G. In the short term this could be another 3D TV issue, a lot of hype, 3D TV’s, 3D Content and then it bombed”.

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