Recognizing the business potential, telcos ranging from China Mobile Ltd. to Verizon Communications Inc. and SK Telecom Co. 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 $712 billion by 2030, if they introduce such innovative 5G applications on top of just laying pipes, according to a research by Ericsson AB’s research arm Consumer & IndustryLab.

“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.

The World’s Next ‘Arms Race’ Will Be All About 6G Dominance

China Mobile, the world’s No. 1 carrier by subscribers, Verizon, the largest U.S. operator and South Korea’s 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 operators across the world launched their 5G networks in 48 countries, according to industry research platform GSMA Intelligence, which predicts that global carriers will spend $720 billion on the networks between 2021 and 2025, or $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 commercialize 5G, average revenue growth at the six dominant operators has slowed to 15% in the seven years through 2020, versus almost 50% in the previous four years. For instance, China Mobile spent more than 102 billion yuan ($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% of the 5G-enabled application market by 2030, according to Ericsson’s research arm.

For now, developers of games linked to the metaverse concept are performing well. Roblox shares have surged almost 90% since they started trading in New York in early March. Unity Software Inc., a game engine maker investing heavily in virtual reality, has seen its stock price more than double since its September listing.

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 similar focuses, was founded in September last year, with members including South Korean carrier LG Uplus Corp., China Telecom Corp., Japan’s KDDI Corp. and U.S.-based Qualcomm Inc.

Still, there’s 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-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.”