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O2 sets October deadline to join the 5G race

5G launches are starting to become old news nowadays, but the UK will soon be in the enviable position of having all of its MNOs up-and-running.

O2 has confirmed the on switch will be hit during October, going live in 20 cities by the end of the year, which will be expanded to 50 by the summer of 2020. With Vodafone and EE already live, Three set to launch in a matter of weeks and O2 bringing up the rear, the 5G economy is fast-approaching in the UK.

“O2 will finally join the 5G party,” said Paolo Pescatore of PP Foresight. “This feels somewhat forced upon in light of moves by the other mobile operators.

“Though O2 will be the last to offer 5G services, it is still early days as the network is not widely available. The move is good in the interests of UK and it will be one of the first countries in the world to have all mobile operators offering 5G connectivity.”

Although there are no details on pricing, we get the impression there won’t be anything adventurous or interesting here. During a press briefing the management team attempted to undermine the innovative approach Vodafone showed a couple of weeks ago with its speeds tiered approach to data tariffs, a dig which suggests it will stick with the ‘bigger, faster, meaner’ mentality, which has exhausted the patience of consumers throughout the country.

Another question which remains unanswered is whether O2’s MVNO partners will have access to the same technology, enabling them to also offer 5G services through the O2 network. Agreements have allegedly been signed, but the question of timelines for MVNO partners was met with shrugs.

One area where there is little confusion from the management team is on the radio supply side. Rivals might be getting twitchy over the Governments decision to delay any decision on Huawei, but O2 has elected to stick with its traditional suppliers Nokia and Ericsson. Huawei equipment might be installed on a dozen cell sites around the country, owing to 5G trials, but it does not appear the lack of clarity from the Supply Chain Review announcement will have any detrimental impact at O2.

On the enterprise side of connectivity, this is an area which will be up-and-running sooner rather than later. A new division, known as O2 Business, will launch on August 1, building on the momentum the MNO has been generating over the last couple of months. The enterprise market is an area of significant growth potential for O2, and it does seem to be gaining traction through its open-invitation for R&D with the FTSE 100.

Two examples of this progress include Northumbrian Water Group, we the pair are trialling 5G sensors to manage water quality and prevent leaks, and also with Network Rail for its own 5G trials. COO Derek McManus said the transport network poses one of the most significant challenges for the telco industry, with only a small percentage of tracks, those in the immediate area around stations, being genuinely commercially attractive for network deployment.

Interestingly enough, this 5G announcement will overshadow healthy financial results for the first six months of 2019. Revenues for the period grew 5.1%, while total connections running across the network (O2 and MVNO customers) has also increased to 33 million, up 3.6% year-on-year.

O2 now currently has 25.4 million customers in the UK, commanding churn rates of 0.9% over the first six months. Postpaid net additions were 41,000, a number which increases to 612,000 when you include M2M connections.

What you can expect to see from O2 over the next couple of months is a sustained approach to investment in the 4G network as well as 5G deployments. The management team has suggested consumers are more interested in a more reliable and consistent 4G experience, 31%, while only 11% of respondents to a survey state 5G is a driver for purchasing decisions.

O2 does not have the most glimmering of records when it comes to 4G, regularly battling with Three for last place in Opensignal rankings, though it will be interesting to see how the £358 million over the last six months impacts this performance. O2 has been regularly committing healthy amounts to the CAPEX column over the last 18-24 months, and hopefully this will translate into improved performance sooner rather than later.

While all the 5G launches across the UK are going to be incredibly limited in terms of coverage, we would not recommend rushing to fork out a grand for a 5G capable phone for the moment, the UK is in a very enviable position. In October, all four MNOs will have their first foot through the door, stepping into the 5G economy with the UK as a global leader. Who would have said that would have been possible three years ago?

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