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Network quality is a powerful wave to "lower churn and increase ARPU"

(Image credit: Ericsson)

The next three years will determine the 5G business landscape and the key for success will be a strong ecosystem, Ericsson President and CEO said.

Speaking at the Ericsson UnBoxed Office virtual webinar, Borje Ekholm said that consumers are willing to pay a 20% price premium on 5G but the willingness to pay is tightly connected to two things – consumer experience of the network and people should notice a real difference between 4G and 5G.

“This emphasis why network quality as well as having a 5G network with decent coverage is a top priority. More than ever, connectivity is key. With the spread of Covid-19, fixed and mobile communications networks have become a bigger part of the critical infrastructure, showing the importance of quality in the connectivity,” he said.

In the new normal, he said that the importance of a strong and reliable communications network is greater than ever.

“We are staying close to our customers to help them provide the best possible connectivity and network quality. Fortunately, the impact of our supply chain has been so far limited and we are closely monitoring the situation. We have plans in place to increase our resilience.

“We have witnessed some amazing transformative changes over the last two months. We have witnessed a fast shift in traffic from business areas to residential areas in just a few days and due to this, the traffic is up 20% in many networks without major service degradation.

“Our focus at Ericsson is the long term. Like all long terms, we have built up many short terms. Therefore, right now we need to tackle the short-term challenges such as the pandemic. At the same time, we ensure that with the pandemic in a stronger competitive position by investing in R&D and in our digital transformation,” Ekholm said.

Moreover, he said that research shows that network quality is a powerful wave to lower the churn and increase the average revenue per user (ARPU).

“In every country we analysed, a service provider with the highest network quality has the highest ARPU and the lowest churn when compared to a service provider with the lowest network quality. In about half of the countries, the highest quality network outperforms on both ARPU and churn. When we looked at all service providers, network quality correlated with increased ARPU and reduced churn,” he said.

Opportunity to rethink and reevaluate

Ericsson chief said that investing in network quality keeps subscribers happy and network quality is one the biggest influencers of churn after macroeconomic factors.

“We are already seeing signs of service providers monetising this 5G opportunity with positive ARPU trends and growing revenues in pioneering 5G markets,” he said.

The Swedish networking giant has 30 live commercial 5G networks out of the 91 commercial contracts signed across four continents.

Ekholm said that there were already 13m 5G subscribers by end of 2019 and expect 2.6b by 2025.  

However, he said the difference between the 5G and earlier Gs is the impact it will have on the business. For many enterprises, he said the immediate value of 5G is not just high speed and low latency.

Instead, what matters the most now, he said includes reliability, real-time positioning, security and privacy utilizing network slicing.

“When we asked enterprises how likely they would consider a service provider for a supplier of a variety of IT and IoT areas, 70% of enterprises want to engage with a service provider as a digitalisation and transformation partner beyond traditional telecoms,” he said.

Studies show that digitalisation could generate and address a revenue opportunity of $700b, in addition to 35% on top of currently available services.

“But with every crisis, there is the opportunity to rethink and reevaluate. Our balance sheet with more than $3b in net cash gives us stability when entering into this crisis. These are challenging times for all of us,” he said.