It was a sudden surprise. At the end of September, Bulgarian Telecommunications Company (BTC) announced that its 5G network is live and ready to go. Just a day earlier it was in test mode, so logically the news brought with itself more questions than answers: is this really a 5G network? A working one? The technology promises incredibly fast data transfer speeds, but only in the next few years. The short answer is: yes, it is a 5G network but with a lot of reservations, at least for now - a limited coverage, even more, limited capacity and just one type of smartphone which can use it.
BTC, the biggest telecommunications operator in Bulgaria in terms of revenue, rolled out its 5G network in the central parts of the 27 regional centres in Bulgaria, as well as along the Sofia - Plovdiv highway. The speeds that can be achieved are way below the expectations of 1 Gbps promised by genuine 5G networks. And at this point, it can be only used by one model by Huawei. In the next few weeks, there should be more and more phones from other top smartphone brands.
The network itself is working through upgraded 4G equipment rather than entirely new cells. BTC doesn't say what the exact number of active sells is but does acknowledge that they are "a few hundred, and not one or two in every city". There was also quite a big problem - the frequencies needed for 5G are still used by the Ministry of Defense. BTC has found a way around it by using the frequencies at work, which are used for the 4G network. And while the telecom does say that the network is still very far from what it is expected to deliver, they believe it is an important step.
"There will be years until we have a fully-working, optimal 5G network. What is important for us is that we have rolled it out on the market. The first thing we need is coverage. The second is capacity, but this will come with the new frequencies, which we expect next year. The third is enough 5G devices. Most smartphone makers want a network with coverage so that they can test the integration of the devices," says Radoslav Zlatkov, chief technology officer at BTC.
Does it make sense?
One of the most important questions about the rollout of 5G networks in Bulgaria is whether it makes sense at this point. There are quite a few reasons for scepticism, including the small number of 5G devices and the fact that the 4G network is still very sufficient in covering the needs of business and end-users. Building an entirely new infrastructure for the next generation network means hundreds of millions of euro invested by the telecom companies. It is pretty much a lose-lose situation: there is no need for a new network because there are no devices - and there is no need for new 5G devices because there is no new network. On top of that is the question of whether anyone is ready to pay for the product.
"Every network starts with coverage. This is the reason why we covered the most densely populated places. The first and most important reason why we need the next generation network is that data traffic is rising all the time and at some point, the 4G network will not be enough. This is why we are getting ready so early," says Zlatkov.
The 5G technology uses frequencies from 700 MHz to 6 GHz, as well as millimetre wavelengths from 24 GHz to 86 GHz. So far, the telecom companies are only using 900 MHz, 1800 MHz and 2.1 GHz. The big question around 5G networks remains the availability of the frequencies currently used by the Ministry of Defense. The government should have released those frequencies by now, which obviously has not happened yet. Last year, the telecom companies were also unsatisfied with the prices that the government wants them to pay for using the frequencies.
The picture looks more clear and optimistic nowadays: BTC expects that the key frequencies of 700 MHz and 800 MHz will be available for auction next year and tests are already underway between the companies and the government. Other key frequencies such as those around 3.6 GHz should also be auctioned next year. Low frequencies secure the coverage, while high frequencies secure the capacity and the speed. Zlatkov says that there is also an improvement in the working relationship between the telecoms and the Communications Regulation Commission (CRC), and prices have fallen. "The prices have been adapted to our revenues," he says, without specifying how much BTC expects to pay at the auctions.
Capital Weekly asked the other two big telecom companies in the country - Telenor and A1 Bulgaria, about their own 5G plans and whether there are other networks on the way, even if not fully operational mode. "We are constantly looking at what the market needs and we assess how we can use new technologies, including a 5G network. We are testing the possibilities of using 5G in real cases," Telenor said in a statement.
A1 Bulgaria says that it can also start its own 5G network, but it has quite a few reservations whether rolling it out without capacity will lead to massive disappointment among those with high expectations of the technology.
"We are doing final tests on the frequencies around 3.6 GHz and we expect to be able to buy the frequencies needed for 5G. When we have them, then we will roll out a real next-generation network. We promised our users and the business not only a new icon on their smartphones or a new name for the network. If the technology is only available for certain smartphones and does not live up to the expectations of speed, then it might be taken negatively by a society which already has lots of reservations about it," says A1 Bulgaria.
The expensive labyrinth of 5G equipment
Auctions for frequencies are just one part of the price for a fully-operational 5G network. The network equipment is the second part which looks like a minefield due to the aggressive geopolitical war against Chinese giant Huawei, the biggest network equipment maker in the world. The reason is the position of the United States and other countries that Huawei equipment could be used by the Chinese government for spying.
The hardships for BTC are relatively small. For its core network, the company uses products of European manufacturers Nokia and Ericsson, and for its transmission network - of U.S.-based Cisco. Its radio network (the base stations) however is Huawei-made. If the Bulgarian government decides to ban the Chinese company, this might be a problem for BTC and even a bigger one for its rival Telenor, which uses Huawei in its core network. Romania has already banned Huawei. Bulgaria and most of the other EU member states are probably waiting for the decision of Germany.
"The issue around the radio network is more complicated and it also stands before giants like Deutsche Telekom, Telefonica and so on. We also have such a discussion, but it's on the level of United Group (the new owner of BTC - editor's note). We will try to make the most optimal decision in line with government provisions. We, as engineers, are ready for such measures", says Zlatkov.
The other problem is that building a new network is pretty expensive. As Zlatkov says, Bulgarian operators buy equipment "at prices on par with European telecoms, or even higher", but without having the same level of revenues. "Our users pay some of the lowest prices in Europe. We can compensate this only with engineering solutions."
Not the best moment for investment
BTC does not say how much they have invested so far in their network, arguing that these are ongoing investments and not a particularly high sum of money. At the end of last year, the company said it expects that building the new network will cost around 800 million levs (409 million euro) altogether for all three telecoms (not each) in the next four years. Other forecasts go north of 1 billion levs for the three companies.
Such investments are pretty big anyway, but this year the situation got even more complicated. While these estimates were made in November of 2019, just a few months later the companies had to redirect their investments towards increasing the capacity of the existing network. The reason was the coronavirus outbreak and the resulting spike in traffic because of e-education and remote work. Zlatkov says that the investments have stagnated and even though BTC has "kept them on levels comparable to last years", the overall sum of money has stopped growing. This raises the big question when Bulgaria might have a fully operational 5G network.
An unexpected factor is a deep fear in some groups of society - particularly in Facebook - which do not want 5G network, because they believe it is harmful to their health. Such theories are not new, but those groups got a new kick last year, as the news of BTC rolling out its network angered them even further. Zlatkov says that the panic is illogical because the frequencies needed for 5G networks have always been active, albeit not in use by telecom companies.
"These frequencies are at work even right now, but that does not bring out fears. Our routers at homework on 3.6 GHz. 5G is a lot less harmful. We already know what it does to people because we live with it. I have been working in the telecom sector ever since the first generation and for me, it's an absolute fact that new technology is always better and more efficient. Old phones and equipment were a lot more harmful than the ones nowadays," says Zlatkov.
Bulgaria has three big telecommunication companies: BTC (Vivacom), A1 Bulgaria and Telenor. With the sole exception of A1 Bulgaria, who has been part of A1 Telekom Austria Group for the last 15 years, the other two telecoms have had various owners through the years.
Norwegian group Telenor bought Bulgarian mobile operator Globul from Greece's OTE in 2013 and renamed it under its own brand in 2014. Four years later, investment group PPF, owned by Czech billionaire Petr Kellner bought the business of Telenor in Bulgaria, Serbia, Montenegro and Hungary for 2.8 billion euro. The name Telenor was preserved, even though the Norwegian group was no longer owner. There is already speculation that PPF might sell the business, according to Mergermarket.
Earlier this year, the network infrastructure of Telenor Bulgaria was spun off from the retail business into the newly founded company CETIN Bulgaria owned directly by PPF, and not the Bulgarian telecom. BTC is an even stranger business story. It was privatized in 2004 and since then has had six different owners. The second-to-last one was Bulgarian entrepreneur Spas Roussev, who bought it in 2016.
In November of 2019, it was announced that Dutch-based United Group wants to buy the company and in April of 2020, the European Commission approved the deal. And while Roussev paid 750 million euro for the telecom in 2016, he sold it for 1.3 billion euro only four years later - while still sitting on the company's supervisory board.