MWC22: State of the Industry

Joakim Reiter, Chief External and Corporate Affairs Officer, Vodafone Group, delivered this speech at Mobile World Congress 2022 during a session entitled 'State of the Industry: What's Next for the Mobile Sector?'

It’s my pleasure to be with you today at Mobile World Congress and to be talking about the state of the industry.

We are at a critical juncture. In the midst of the pandemic, UN Secretary General Gutierres rightly said “digital has become a life or death issue”. He is right. The pandemic has proved just how essential connectivity, digital services and technology have become for the functioning of the economy and society at large.

This will not change post-pandemic. If anything, the importance of digital transformation will only increase, especially with the roll out and wide-spread adoption of 5G.

It is estimated that 5G will create 13 point 2 trillion dollars in global economic value by 2035, generating more than 22 million jobs in the 5G global value chain alone. This is equivalent to the GDP of China.

5G is the catalyst for innovation that will transform every Industrial sector and help green our economies. 5G is the key enabler of smart factories, moving workers from menial to skilled jobs. Our Smart Cities are built on 5G, which then attract the best talent and reduces climate impacts. 5G goes hand-in-hand with frontier technologies such as AI, IoT, big data, blockchain, robotics and many more, unlocking huge growth opportunities.

In the 1700s, the invention of the Spinning Jenny transformed the global textile industry and kickstarted the industrial revolution. I am not exaggerating when I predict that 5G will catalyse a similar step-change, transforming industry today and for the future.

Welcome to the next industrial revolution!

So far, so good – exactly what you might expect me to say at Mobile World Congress. No disagreement here.

But today, I also want to sound a warning.

As we advance mobile technology, we also increase the risk of inequality. So, while it’s clear that 5G has the potential to trigger improvements for everybody in society, the sizeable gains of 5G - and the innovation it enables - will not be equally distributed.

The inconvenient truth is that there will be – and there are already – major winners and losers in the 5G world. With any significant technology advancement in history, this will translate into winners and losers on the global stage: into growing prosperity gaps between those pioneering companies and nations vs those lagging behind, and into seismic power and wealth shifts across the world.

It’s the pace of 5G adoption that will determine how profound that global wealth distribution will be.

The first nations to have extensive coverage in 5G low-latency technology already have a head start in experimenting and innovating to create the 5G application that propel competitiveness. It is no accident that the mobile-native internet and tech giants grew out of the US, where smartphone-enabling 4G was launched ahead of anywhere else.

5G is having the same effect, only this time it will create winners and losers across the whole economy. Why will it be different this time? Because 5G is, first and foremost, a machine-to-machine network technology capable of driving industrial change.

Welcome to the era of not only great transformation, but also great redistribution.

So, based on current trajectories of 5G deployment, who stands to lose out the most?

Among the global South, Africa and Latin America are particularly at risk of cementing their lower share of global prosperity in a 5G world. Sub-Saharan Africa, in particular, is at high risk of falling desperately behind while it develops a spectrum strategy, and as a result, trials or commercial deployments of 5G remain extremely limited.

More surprisingly, there is equally large discrepancies amongst developed countries. Europe is falling behind, and also stands to lose the most in terms of its current share of global wealth. If Europe remains on its current trajectory, it is likely – at best – to reach 60% transformational low-latency 5G coverage more than 10 years after China.

Europe is running a real risk – an economic risk, involving the jobs and livelihoods of millions of citizens – that it becomes a global laggard rolling out 5G and benefiting from innovations around 5G applications. This will, in turn, put at jeopardy Europe’s future strategic autonomy.

In contrast, China, the Gulf and South-East Asia seems determined to use 5G as key lever for future growth. Australia, the US and UAE are already at 50% coverage and South Korea is even further ahead at above 90%.

The economic cost for Europe just to catch up in this digital race was 315 billion euros in 2021 alone. This gap will be more than 1 point 3 trillion euros by 2032, according to a European Parliament study. That’s more than the entire annual GDP of Spain.

Countries or regions that are leading on 5G have taken a ‘whole of government approach’ to implementing it. Those that are lagging behind have not.

I believe that a whole of Government approach is essential. There are 3 essential enablers within this approach.

First, the winners have placed 5G connectivity, services and applications at the top table, at the heart of government strategy, not just relegated it to a single ministry. And they have backed this with comprehensive plans reaching across all sectors of the economy, boosting transport, industry, agriculture, education, creating smarter, more sustainable cities, involving all stakeholders, working closely with industry.

Look at South Korea. In July 2020, the government announced the Korean New Deal, a national strategy with a vision to create a smart, green, and inclusive country – with 5G as the critical infrastructure for a data and innovation-driven economy. South Korea has mainstreamed 5G into all parts of its government. As a result, they expect this growth engine to contribute 50 billion dollars to GDP and create 600,000 new jobs by 2023.

A new 5G digital deal is needed.

Secondly, each region must use 5G to support and transform its strongest industries.

Today, Europe has global leadership in many industrial sectors – manufacturing, automotive, defence, energy, to name just a few. But critically, the industrial world is merging with the digital world. It will be new digital technologies that will drive the next wave of productivity in most of Europe’s traditional industries. If Europe falls further behind in rolling out 5G, Europe’s industrial leadership will falter. African industry isn’t even in this race yet and to join it, and compete globally, it will require laser focus from Governments on opportunities where 5G can be a game changer.

But is this enough?

The final and most critical enabler is that Governments need to remove policy barriers and incentivise investment at unprecedented levels.

We have already seen examples of this in Europe with 20% of the European Recovery Funds allocated to digital and 37% to the green transition and recent spectrum auctions in Spain, Greece and the UK, all of which were designed to incentivise investment. In Greece, 25% of spectrum fees are reinvested into creating new 5G services.

However, truly transformational 5G requires significantly more investment than 4G (4-5 x more CAPEX than 4G). It is not possible to reach this level of investment with the excessive fragmentation in the industry. Europe has >100 MNOs, vs 3 in US and China.

Failure to implement these three enablers will drive ever-widening inequality between regions, countries and continents, of a kind we will not have seen since the first industrial revolution.

To close these 5G gaps, every country will need to develop a whole of Government, 5G vision appropriate to its stage of development - and mobilise its entire ecosystem behind it.

So, to conclude: ‘what’s next for mobile?’ is really a more profound question of ‘what’s next for society and the economy?’ And what I think is really at stake is the future prosperity, jobs and global competitiveness of every country in the world.

We all have a responsibility to act now to ensure a sustainable and secure future for everyone.