Slow start in Korea so far but no worry, 2H20 looks solid
Annyeong Haseyo as we say in Korean to greet someone, this is the time of the year to check the pulse of the world’s first 5G commercial market that like the rest of the planet was not immune to COVID-19. As the nation’s 3 service providers reported their 1Q20 earnings in the past 2 weeks or so, only KT (Korea Telecom) confirmed its capital expenditures (Capex) guidance for the full year, the 2 others did not provide any, which is somewhat surprising and might be related to COVID-19 uncertainties. Overall, 2019 capex jumped 56% over 2018 and topped KWR8.8 trillion ($7.2B), a level unseen since the 2012 4G LTE capex peak and totally fueled by a massive and aggressive 5G rollout in the 3.5GHz band that brought about 100,000 5G sites live at the end of December with a total of 4.7M subscribers.
It’s also worth mentioning that this 5G capex hike is KRW500T lower than the 4G capex peak, an outcome I rightly predicted at the beginning of the 5G discussion in 2014 by applying the following rule: as introducing a new G leads to more efficiencies at a lower cost, the total cost of its full-blown deployment will always be lower than that of the previous G.
1Q20 CAPEX DOWN 6% YOY, AND DOWN 67% QOQ
I’m not worried and you should not be either because this is a typical seasonal effect, I’ve been observing for more than a decade. The pattern showed in Figure 1 is typical of an aggressive introduction of a new generation of wireless technology. What’s interesting though is the lag between actual cell site installation—in case of a new one, and existing cell site upgrade with a new 5G NR (new radio).