Last year saw hits and misses for the telecommunication sector in the UK. With a post-pandemic surge in digital communication and an uproar by the government on 5G auctions, London went on to emerge as the largest telecom market in the European continent.
While the global telecom industry lost around £31 billion in 2021, the UK’s net telecom revenues saw a surplus. However, what drove the numbers? Is it the government initiatives to deregulate a highly competitive market or a perception change amidst the London-Huawei legal battle?
A Post Pandemic World is a Period of Influx for Telecoms
One factor that definitely worked in the nation’s favour was the 5G bailout. EE, Vodafone, Three and O2 introduced 5G in 2019, while several other big and small players competed for fibre network expansion and Open RAN.
Moreover, the COVID-19 pandemic brought several subscriber and traffic pattern transformations, resulting in a massive spike in pay monthly subscription plans. As per digital health reviewer ORCHA, the overall internet downloads rose by 200% after the pandemic and are set to continue an upward trajectory.
Johan Wibergh, Vodafone Group CTO, shared Vodafone’s plans to use Open RAN technology in 30% of its European network by 2030. The target is difficult but highly possible to achieve.
Meanwhile, Samsung and Vodafone have collaborated to launch an Open RAN site in rural areas as the first step towards the Open RAN revolution. The goal is to expand to 2,500 locations by 2027, covering South West England and parts of Wales.
Launching just one site might not seem like a big deal, but the move has a lot of significance regarding how Open RAN was viewed until now. Open RAN is no longer just a concept but a commercially viable reality.
Furthermore, Vodafone’s backing has crushed the myth about Open RAN being a non-prime operator’s dream. On top of everything, the 5G rollout is in full motion, as EE says it has achieved the 50% mark and is expected to cover the remaining 50% by 2028.
Only a month ago, the UK government reiterated its commitment to extend gigabit fibre to 85% of homes by 2025. Acting on its pledge, Boris Johnson’s cabinet recently signed an agreement with Japan to resolve global telecom supply chain issues and create an R&D ecosystem for futuristic technologies like Open RAN and 6G.
The deal fits with the UK’s highly ambitious Shared Rural Network Program – an aggressive target of eradicating 4G internet “not spots” from rural England.
Amidst lobbying by digital advocates and rising pressure from the Left, the UK finally crafted a telecom strategy last quarter. After months of going back and forth, the government announced the UK Telecoms Innovation Network – an advisory body and a primary point of contact for telecommunication firms looking to raise funding.
While the UK government is finally at an advantage, big and small private players are certainly not lagging. However, it seems like they are still scratching the surface, especially when China is competing against the world to monopolise the semiconductor market – a prerequisite for the telecom industry to flourish.
Current UK Telecom Landscape: The Altnets vs. the Big Names
A slight dip in telco revenue last year was largely a reflection of its robust competitive environment and sharp pricing. 2021 was also a year of some of the biggest telecom mergers – Virgin Media joining hands with Telefonica Group’s O2 to build Virgin Media O2, a potential contender to BT.
Further industry consolidation is highly likely as telcos attempt to create economies of scale and capital infrastructure necessary to generate consistent revenue growth.
The constant acquisitions and mergers of prominent market players have posed a risk to alternate network providers who will now have to compete stringently over the rollout of fibre networks.
Giants like Openreach, BT and Virgin Media O2 have quickly picked up on this threat by speeding up the rollouts, while CityFibre, Hyperoptic, Gigaclear and other altnets are struggling to survive. Several smaller firms have already run out of money, while others are in talks with mainstream players.
Another exciting addition to this mix is the fibre startup Netomnia, which aims to connect one million homes by 2024. To achieve the number, Netomnia will be in direct competition with BT and Virgin Media O2, both occupying a dominant market position. Plus, Netomnia will also have to compete with CityFibre and Hyperoptic. However, not all is gloom and doom for the altnet; it has recently secured funding of £295 million and plans to expand in the south.
During this period of intense competition and lower margins, both operators and investors will have to reinvent monetisation avenues through infrastructure deals and necessary consolidation.
Now that the crypto sector is struggling and global economies are entering a possible recession, investors might want to hold on to their money rather than funding a market with oligarchic tendencies. In addition, further government intervention is needed to upscale the telcos and prevent them from entering a debt trap.
The big three (Voda, O2, BT) are already doing everything in their power to see off small competitors with ground reach, but they will have to keep their eyes peeled for challengers like OTT (over-the-top communications) providers, streaming giants like Netflix and Amazon, value-added resellers, master agents and prominent altnets.
The UK telecoms market has always worked on tighter margins and intense competition. It’s time for the nation’s users to actually exploit the overcrowded landscape and benefit from competitive pricing, choice and service delivery innovations.