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Staff demonstrate a VR cycling system during a media tour of SmarTone 5G Lab at Sky 100 at the International Commerce Centre in Hong Kong on May 1. Telecoms companies are betting on virtual and augmented reality to help recoup the costs of building 5G networks. Photo: SCMP/Sam Tsang

Telecoms firms see ‘metaverse’ as killer 5G app to help recoup billions spent building next-gen networks

  • Telecoms companies in China, the US and South Korea see augmented reality and digital worlds as the key to making back money spent on superfast 5G networks
  • The ‘metaverse’ concept has inspired companies like Roblox, but there is no guarantee it will become the big revenue driver that telcos hope
About a decade ago, mobile carriers poured billions of dollars into high-speed 4G networks only to see technology giants such as Apple, Facebook and Google walk away with most of the profits fuelled by social media. As operators plough even more cash into 5G, they are betting on a futuristic concept in hope of a fair share of the returns this time.
Telecommunications companies are looking to build a platform based on the metaverse, an idea that inspired Ready Player One and online games by market darlings such as Roblox Corp. Early-stage examples include virtual and augmented reality headsets or glasses that provide immersive experiences. Advanced versions – still years away pending superfast wireless data speeds – combine multiple technologies like holograms to bring the internet to life: 3D avatars of people working, interacting and relaxing in digital replicas of offices, factories and leisure venues.
Recognising the business potential, telecoms companies ranging from China Mobile to Verizon Communications and SK Telecom are jumping into the fray – alongside online-game developers – to build a “killer app” that could resemble a blend of today’s social media and e-commerce, but on steroids. Operators could earn a third more in revenue, potentially reaching US$712 billion by 2030, if they introduce such innovative 5G applications on top of just laying pipes, according to a research by Ericsson’s research arm Consumer & IndustryLab.

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“If you do nothing, you will stay on a flat curve revenue wise,” said Stockholm-based Pernilla Jonsson, head of Consumer & IndustryLab. “We see the potential. It will be very interesting to see how this plays out. Who will actually be the winners of the metaverse is still a very open question.”

Jonsson expects the development of the metaverse to be gradual, starting with those headsets and glasses piggybacking on smartphone connections. Cutting-edge metaverse applications are still at the conceptual stage. If they do become reality, virtual meetings and shopping online would feel like real-life activities, with digital copies of almost everything that also reflect real world changes in real time through advanced 3D image capturing.

China Mobile, the world’s No 1 carrier by subscribers, Verizon, the largest US operator and South Korean leader SK Telecom are among those building platforms based on virtual or mixed reality, a term that means blending the digital world with real-life environments.

While most current metaverse platforms are online video games, “what 5G is going to do is really turn that metaverse experience into something that reaches out into your daily life”, Sarah Gilarsky, a business development lead for Verizon’s next-generation entertainment partnerships, said at a February panel discussion by the company’s research arm.

SK Telecom wants to create a virtual economy based on its platform, said Cho Ik-hwan, SK Telecom’s vice-president and head of mixed reality development, where people not only seek leisure and entertainment, but also trade and develop businesses.

“The metaverse is our future business model. It will be our core business platform,” Cho said. “We want to create a new kind of economic system. A very giant, very virtual economic system.”

Last year, 113 mobile network operators across the world launched their 5G infrastructure in 48 countries, according to industry research platform GSMA Intelligence, which predicts that global carriers will spend US$720 billion on the networks between 2021 and 2025, or US$144 billion a year on average. Slow adoption of 5G by users and lack of a wide range of applications mean a long slog to recover the hefty costs.
In China and South Korea, two of the earliest countries to commercialise 5G, average revenue growth at the six dominant operators has slowed to 15 per cent in the seven years through 2020, versus almost 50 per cent in the previous four years. For instance, China Mobile spent more than 102 billion yuan (US$15.7 billion) on 5G last year, but revenue from 5G businesses was just 87 billion yuan in the period, according to Bloomberg calculations.

“It would be so difficult for the telcos to recoup their huge investment just by selling 5G data packages to subscribers,” said Wilson Chow, global technology, media and telecommunications industry leader at PwC China. More carriers will participate in the metaverse space going forward, he said.

While it’s tough to estimate how much metaverse-related applications will generate in the long term – much of the potential remains conceptual – early metaverse uses such as enhanced and immersive media will account for 40 per cent of the 5G-enabled application market by 2030, according to Ericsson’s research arm.


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Committed to heavy investment in 5G over the next few years, telcos would need funding partners to build these platforms and can’t pull it off by themselves, said Fuad Siddiqui, a senior partner and vice-president of Nokia Oyj’s research arm Bell Labs.

Industry alliances are already being formed. South Korea launched a group in May to develop metaverse-related technologies and ecosystems, composed of 17 companies including SK Telecom and Hyundai Motor Co, as well as eight industry groups including the Korea Mobile Internet Business Association. The Global XR Content Telco Alliance, which has a similar focus, was founded in September last year, with members including South Korean carrier LG Uplus Corp, China Telecom, Japan’s KDDI Corp and US-based Qualcomm.

Still, there is no guarantee investing in metaverse concepts will lead to much. Video game Second Life, where players had a virtual life in the game through their avatars, became a massive hit more than a decade ago before its popularity declined as users moved on to mobile-based social media. Google Glass, much touted around 2013, failed to catch on amid concerns over pricing, privacy and safety.

Though Covid-19-induced lockdowns gave these online games a boost and offered a peek into the early stages of the metaverse, the demand for such applications will outlast the pandemic, said Vincent Lam, chief investment officer of Hong Kong-based VL Asset Management.

“This is the trend for the future,” said Lam. “Covid has changed everybody’s mindset. Not only young people, even older generations feel they need to adapt to a digital lifestyle.”