Kenanga Research: Individuals not the target market for 5G currently

KUCHING: Individual consumers are not the target market for 5G currently as consumer applications and devices refined for 5G applications have yet to become widely accessible, giving consumers less of an incentive to upgrade to 5G says analysts at Kenanga Investment Bank Bhd (Kenanga Research).

In a sector update, the research arm highlighted that 5G monetisation in Malaysia has been sluggish despite commendable growth of 5G availability in Malaysia.

According to data from OpenSignal, 5G availability in the country was at 21 per cent during the 2023 May to July period, higher than neighbouring Asean countries like Indonesia and Philippines who were at 1 and 12 per cent but still slightly behind Thailand and Singapore who were at 25 and 32 per cent at the time.

Despite the rather commendable availability in Malaysia, adoption was still sluggish with its subscriber base of growing only to 1.4 million, just a fraction of the current 43 million 4G subscriber base.

“Moreover, out of the 74 per cent CelcomDigi Bhd (CDB) subscribers that have activated their 5G devices, merely 11 per cent are active users,” they added.

According to the research arm one of the main reasons why 5G adoption has been sluggish among individual consumers is there is less of an incentive to switch over as the current major consumer applications that require 5G seem limited to niche fields like virtual reality experiences, ultra-high speed streaming and autonomous driving.

And while consumer tech developers are all rushing to progressively expand their hardware, software and content to harness 5G’s capabilities, at this juncture these applications are still at their nascent or prototype developmental stage.

“On top of that, the pricing of high-tech 5G consumer devices are inhibitive for an average consumer to afford. Therefore, the typical individual does not feel compelled to upgrade to 5G unless consumer applications are refined and become widely accessible,” Kenanga Research added.

Rather than targeting consumers at this juncture, the research arm advocates that major telcos should instead target large multinational corporations instead of their traditional consumers when developing their 5G marketing strategies.

They note that CDB has since positive traction in their efforts to target corporations as the group managed to achieve an enterprise revenue growth of 1.5 per cent year to date (YTD) emanating from the SME segment, ICT and connectivity solutions.

While it is clear that major telcos will need to focus on corporations next, it may be easier said than done as Kenanga Research highlights that they believe Malaysian users are generally not away of the potential and benefits of 5G, including the abundant and diverse applications of 5G technology for industries and enterprises like precise automation, long distance remote surveillance, real time high-definition broadcasting, analysis of vast amounts of data, etc.

“Such applications result in the transformation of business processes that enable organizations to scale up, enhance efficiency and achieve breakthrough innovations,” said the research arm.

Kenanga Research highlighted that a recent use case for 5G at DHL’s integrated logistic centre in Shaha Alam found that efficiency was boosted by 20-fold and precision enhanced when a system that combines robots and drones with high-definition cameras was deployed.

But even if enterprises recognise these advantages, some may still be averse to transformation as they are inclined to maintain systems and processes to remains status quo.

“This is understandable given the requirement to uproot current systems and fork out hefty technology investments in order to harness 5G.

“Moreover, they also need to be prepared to trim their workforce to enable AI automation to take over via robots and advanced machinery.”

Despite these hurdles, Kenanga Research acknowledges that 5G monetisation will eventually in time end up materialising to provide a boost to average revenue per users (ARPUs) and earnings.

For now, they are hopeful that earnings and dividends for mobile telco players will remain intact after the dual network 5G model takes effect.