Reflection on Telco hot trends in 2021

2021: A year of massive progress in accelerating digitalisation, cloudification, 5G and fibre rollout despite macroeconomic uncertainties.?#

With an optimistic view, 2022 promises to be a year of great change worldwide (Technology & Green), with sustainable growth of all the major players in the Telco industry— not just in terms of business growth, but also in terms of our responsibility to society. Industry leaders have a responsibility not only to drive business and technology innovations but also to enable the societies to unleash their full potential.

However, Covid-19 pandemic, chipsets shortage, supply chain disruption and climate change will remain the major global challenges impacting all industries in 2022.?

2021 Year Review & Celebrating DT achievements

In December, my team "Technology Vendor Portfolio Management" at Deutsche Telekom was responsible for organizing the Q4 All-Hands-Meeting. In this special Christmas edition, we presented?a ?review of the year highlighting the main events around the world and in the Telco industry. We took this opportunity to celebrate our achievements and innovations at Deutsche Telekom. During the holiday period, I was reflecting on those trends and thinking about how these hot topics would develop and shape the telecom industry and our ecosystem.

Thoughts on 2021 major trends

In this article, I would like to share with you my personal views on the telco trends from 2021 underlined by facts and figures, and how they impacted our industry. In my opinion, these trends will continue to impact the future of Telco ecosystem in 2022 and beyond.

• ?Trend #1: Market dynamics and Mergers & Acquistions (M&A)
• Trend #2: Significant progress in Open RAN in Europe
• Trend #3: The raise of tower companies and satellite communication
• Trend #4: Hyperscalers and Telcos:?partnership and competition
• Trend #5: Telcos are frontrunners in sustainability

Trend #1: Market Dynamics and Mergers & Acquisitions (M&A)?

In the PwC 24th Annual Global CEO Survey (2021), 76% of CEOs expect global economic growth to improve in the next 12 months. Several M&A deals in 2021 were focused on recalibrating strategy and accelerating the adoption of technology. I'm sharing below some of the major M&A impacting Telco.

• Rakuten Group announced the acquisition of the US-based mobile technology company Altiostar. Japan’s Rakuten, already a stakeholder, takes total ownership of the Open RAN specialist Altiostar. The acquisition values more than $1 billion. Altiostar has been one of the key technology suppliers to Rakuten Mobile providing key software for the operator's 4G and 5G rollouts, as well as providing its software to other operators such as Dish Network in the US, Bharti Airtel in India, Telefónica markets and more.?
• Ericsson to acquire Vonage for USD 6.2 billion to spearhead the creation of a global network and communication platform for open innovation. This acquisition enables Ericsson to expand its presence in wireless enterprise and broaden its global offerings. The closure of this deal is expected in first half of 2022. The acquisition will reshape and impact the communication market.?
• Cisco Completes Acquisition of Acacia Communications, Inc. for $4.5 B. Acacia designs, manufactures, and sells a complete portfolio of high-speed optical interconnect technologies addressing a range of applications across datacenter, metro, regional, long-haul, and undersea networks. Acacia completes Cisco's optical portfolio and accelerates Cisco's 'Internet for the Future' Strategy.?
• ADTRAN and ADVA announce combination to create global, scaled end-to-end fiber networking solutions leader. Adtran has entered into a business agreement with Adva, a Germany based leader in optical networks. The combination of Adtran and Adva creates a stronger and more profitable new holding company with aggregate revenue of $1.2 B.?
• Strong M&A competition in the semiconductor sector-?the?major beneficiary?of the pandemic and the digitalisation acceleration. Examples of these deals are: Qualcomm completed the acquisition of Nuvia, AMD is planning to acquire Xilinx for $35 B. The acquisition of Arm through Nvidia for $40 B is still under review and discussion. The deal is facing an increasing number of regulatory probes around the world, concerns have been raised in the U.K., the EU, the U.S. and China. It is highly unlikely that the transaction will be approved, analysts say.

Trend #2: Significant progress in Open RAN in Europe

Open RAN (O-RAN) is still at an early stage of small-scale trials and deployments. The announced trials, deployment plans and partnerships are critical to mature the technology and develop a sustainable open ecosystem. The support of the European policy makers is urgently needed to help the development of a strong and competitive European ecosystem. In this ecosystem, the role of system integrators will be very important. Some big operators will take the role themselves; others might work with a partner.

Summary of key O-RAN achievements and deployments in Europe:

• Deutsche Telekom, Orange, Telefónica, TIM and Vodafone Group have signed a Memorandum of Understanding (MoU) to implement Open RAN across Europe. The Open RAN MoU Group aims to promote a fast pace deployment of open, virtualized and programmable RAN technologies and ensure a strong ecosystem of emerging companies in Europe to support a timely roll-out of O-RAN. One of the achievements of the MoU Group was the publication of the Open RAN Technical Priorities Document, that includes a comprehensive list of technical requirements for Open RAN architecture to guide and foster a competitive open RAN ecosystem, promoting openness and flexibility. The Open RAN MoU Group called upon European policymakers and industry stakeholders to make O-RAN a strategic priority.
• Deutsche Telekom, one of the first pioneers of Open RAN,?successfully switched on O-RAN Town - the first live open RAN deployment in Europe. O-RAN Town is a multi-vendor open RAN network with massive MIMO radio units using open fronthaul interfaces to deliver 4G and 5G services across 25 sites. The services are automated through a vendor independent Service Management and Orchestration (SMO) based on ONAP open source. The i14y lab has been set up in Berlin as the hub for O-RAN Alliance, TIP and ONF testing activities together with operator and supplier partners.
• Telefonica and NEC announced to build Open RAN in 4 global markets: Spain, Germany, UK and Brazil as a key milestone towards mass deployment. NEC will serve as the prime system integrator to implement and conduct trials of multi-vendor-based Open RAN solutions with the Telefonica group’s operating companies in four global markets, planned to scale to a total of at least 800 sites for commercial use starting in 2022. Telefonica aims at reaching 50% radio network growth based on Open RAN by 2025.
• Orange disclosed its ambition to deploy only Open RAN equipments in Europe from 2025 onwards. Orange inaugurated the first Open RAN laboratory in France to enable companies to test and validate their products and services.
• ?TIM launched two new Open RAN solutions on its mobile networks in Matera and Turin. A first 5G Open RAN connection on 3.7 GHz frequencies has been established in the TIM Innovation Lab in Turin.
• Vodafone started deploying O-RAN to extend 4G and 5G coverage in 2500 sites in rural areas in the UK. It unveiled its strategic vendors – Dell, NEC, Samsung Electronics, Wind River, Capgemini Engineering and Keysight Technologies – to jointly deliver commercial deployment of Open RAN in Europe.
• 1&1 and Rakuten announced a partnership to build virtualized mobile network based on Open RAN. Rakuten launched first commercial virtualized network in Japan. The partnership with 1&1 provides?Rakuten an entry to the European market. Rakuten will take over the build of the active network equipment and will also be responsible for the overall performance of the 1&1 mobile network. 1&1 will have access to the Rakuten Communications Platform (RCP) stack of access, core, cloud and operation solution so that the 1&1 network can be operated in a highly automated manner.

?Trend #3: Hyperscalers and Telcos:?partnership and competition

Hyperscalers and telcos co-exist in an increasingly dynamic ecosystem. While telcos look to realize their ambitions and roles beyond connectivity, the hyperscalers are expanding their involvement in the telecoms industry/value chain, including in edge computing, private LTE/5G and increasingly in telco networks. The partnership between telcos and hyperscalers strengthens their respective positions and deliver complete solutions to the customers. Several operators like AT&T, Verizon, Vodafone, Telefonica announced partnerships with AWS, Microsoft Azure and Google.

?Also network suppliers and hyperscalers are working closely to deploy network workloads on the hyperscaler' clouds and accelerate their cloud-native 5G readiness, in some cases partnership includes joint offering and Go-to-Market like Nokia and Google Cloud.?

Recently, the 3 hyperscalers took another step to get closer to customers at the edge by launching platforms dedicated to telecom networks and enabling integration with 5G networks. The latest of these products include Wavelength from AWS, Azure Edge Zones from Microsoft and Anthos for Telecom from Google Cloud.?The hyperscalers' strategy to grow their share of the telco business is not only through partner and channel business, but obviously they leverage on their large customer base to sell directly communication offerings like managed Private 5G and WAN networks as announced lately by AWS at the re:invent annual conference.

Trend #4: The raise of tower companies and satellite communication

Tower companies are emerging like never before as more mobile operators sell or spin off their tower holdings seeking growth, shareholder value, and better margins. Because towers make up the bulk of their capital investments and, especially in emerging markets, most of their operating costs, mobile operators are opting to share towers—renting them from other Telcos or tower companies instead of making ongoing financial investments in infrastructure. This article the rise of the tower business by Kearney examines what tower companies and mobile operators can do to create a sustainable business and shareholder value. I would like to highlight?following partnerships announced in Europe.

• ?Cellnex and DT announced a joint venture transaction with Deutsche Telekom?to add 3200 towers in the Netherlands.
• ?VantageTowers and 1&1 partnership: The announcement of Badiaa Bazarbacha (Executive Head of Sales at VantageTowers) about the new partnership of VantageTowers and 1&1 confirms VantageTowers strategy to maximize the return on their assets by offering its services to Vodafone's competitors in Germany. 1&1 will colocate in at least 3,800 and potentially up to 5,000 existing sites throughout Germany for the next 20 years.?

Satellite communication: opportunity or threat for mobile operators?

Satellite technologies, introduced in the latter half of the 20th?century, have played an important role in providing communication services globally, especially in hard to reach rural areas, where existing terrestrial infrastructure is weak.

?BT announced a partnership with OneWeb for Low Earth Orbit (LEO) satellite network and connectivity services.?Satellite services form a component of BT’s vision to enable digital solutions anywhere in the UK by 2028. .

Google Cloud and Microsoft closed deals with Elon Musk’s SpaceX for Starlink internet connectivity. SpaceX has deployed nearly 1,900 satellites to serve its Starlink broadband network and is planning more. Elon Musk revealed the new Tesla smart phone Pi with built-in Starlink connection.

Trend #5: Telcos are frontrunners in sustainability

Sustainability has been a hot topic in almost every industry in the whole world for quite some time now and is expected to stay the same for 2022 as well.

Telco industry is one of frontrunners when it comes to setting up ambitious net zero targets to limit the Green House Gas (GHG) emissions in alignment with the Paris Agreement. All the major operators have committed to Science Based Targets as well. Many companies are also setting their targets for switching completely to renewable sources of energy for powering their networks. Deutsche Telekom announced their renewed net zero targets in April 2021 and pulled their net zero commitment for the whole value chain 10 years forward. Many vendors are also following these footsteps for example Nokia announced their renewed targets in March 2021 to halve their emissions from 2019 to 2030.

Telcos are also looking at sustainability from monetization perspective because more and more customers are tending to buy sustainable products. Furthermore telcos play a role in decreasing the carbon emissions of other high impact industries through their products/solutions.

?However, this is only the beginning. Going forward, operators need to think how they operate their networks carbon free and how they can become net neutral in their entire value chain which means not only their suppliers but customers as well. It will probably require them to completely rethink their business model.?

Conclusion

I'm looking forward to 2022, especially how we will tackle the major challenges ahead of us and how the telco industry will develop. Please leave me your thoughts and views in the comments.

Last, but not least many thanks to my colleagues Saima Ansari, David Gannon & Holger Erkens for contributing to this article.?

Disclaimer: The views expressed in this article are my own and do not necessarily represent those of my employer.

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