We take a look at the current standing of the telecom industry in India and whether we’re ready for the roll-out of 5G services in India, yet.
With the wake of 2019, 5G has been in constant limelight mainly because of the marked improvement in speeds and its versatility in applications as compared to the previous cellular network technology: 4G/LTE. As far as end consumers are concerned, the bandwidth improvements and drop in latency brought to the table by 5G are expected to bring a whirlwind change in the way we consume data. But on a larger scale, 5G has the potential to bring an unprecedented change in the way industries and machinery work, and improve efficiency in a way that’ll bring about billions of dollars in savings.
But let’s bring our focus back to the most popular end-consumer application right now: 5G smartphones. This year, two of the most popular tech shows on the face of our planet, CES and MWC, were filled to the brim with presentations by OEMs and equipment manufacturers on how they were working towards implementing 5G technology. OEMs like Samsung, LG, Huawei and OnePlus also delivered 5G phones in countries like the US, UK, China and Germany where commercial 5G deployments have already taken place this year.
But why are 5G smartphones not available in India yet?
India is yet to see the launch of a single phone that supports 5G technology, and for a very good reason. Forget about 5G deployment by telcos, India is yet to conduct the spectrum auction where 5G airwaves will be allotted to these telcos. This is exactly why most OEMs who produce 5G smartphones gave a cold shoulder to the Indian Mobile Congress that took place in October this year. While they did showcase smartphones that had been announced in other markets around the world, there was no word on when these 5G-ready phones were coming to India.
There’s another reason why 5G-ready smartphones aren’t ready for India yet: they aren’t affordable. For a market like India where more than half of the smartphones sold are in the USD 100-200 price segment, it’s irrational to find a considerable market for 5G phones that cost well over USD 1,000. And when you factor in the capital investments required for setting up 5G infrastructure, it’s clearly understandable why India isn’t a hotspot of 5G advancements.
But interestingly, OEMs have shown interest in launching 5G-enabled phones in India. Realme, a Chinese OEM, has already promised that it’ll bring 5G phones to India as early as next year. This is quite interesting as until now, Realme has mostly catered to the sub-20k segment in India. While it’s quite obvious that their 5G offering won’t be as economical, it’s a start of the impetus that the telcos need to rationalize their investments in 5G infrastructure. But there’s much more to the story.
Let’s take a deeper dive into where India stands in terms of 5G deployment and see the point of view of all the stakeholders in the industry.
Where do TRAI and DoT stand on 5G deployment?
TRAI released a white paper on ‘Enabling 5G in India’ where it “envisaged to deploy 5G in India by 2020 along with the rest of the world”. The paper is quite comprehensive and covers everything from potential use cases, required investment by telcos, the architecture of 5G network, policies and framework, and the challenges that the industry will face in implementing this new technology.
The white paper also highlighted the spectrum requirement for 5G network. According to TRAI, the requirement lies around 3 key frequencies ranges: sub-1 GHz (gigahertz), 1-6 GHz and above 6 GHz. Out of them, the 3.5Ghz band is the one that’s seen globally as a 5G spectrum. But, in India, DoT (Department of Telecommunications) is yet to auction this spectrum. This basically means that telcos in India will have to incur the cost of buying spectrum to launch their 5G services. This is precisely where a gargantuan problem starts to take shape: the already beat-up, debt-ridden telcos have no money to spend on buying spectrum for a 5G rollout.
“Majority of our operators believe that the spectrum for 5G is overpriced by at least 30-40 per cent compared to international standards and auction in other markets like South Korea and the US,”, said Rajan Mathews, Director General of COAI.
Where do telecom operators in India stand on 5G deployment in India?
Before we talk about 5G and how ready Indian operators are, let’s take a look at the industry and how the entrance of Jio has affected the industry as a whole. Jio’s blitzkrieg of launch offers and dirt-cheap tariffs pushed other telcos in the industry to adopt lower rates or be a witness of Jio’s annihilation. Not only did the industry witness a drop in ARPU (average revenue per user), the industry itself consolidated.
Today, India has 3 major telcos operating- Jio, Airtel and Vodafone-Idea. While Jio could afford neck-deep actions due to its cash-rich parent company, Airtel and Vodafone-Idea couldn’t handle the drop in pricing so well. Three years after, Airtel and Vodafone-Idea have been bled dry and they have time only till January to pay up thousands of crores in additional statutory dues. In fact, both Airtel and Vodafone-Idea have posted their biggest ever quarterly loss in Q2 2019. While Airtel lost INR 23,044 crores, Vodafone-Idea trumpeted an unprecedented blow of INR 50,921 crores.
At the time of writing, Reliance Jio is the only profitable telco in India. While its peers posted heavy losses, Jio posted a profit of INR 990 crore in Q2 2019. Although, Jio is also facing problems as its ARPU fell for the seventh successive quarter.
Regarding 5G, Jio claims it’s ready, although, a lot depends on on the viability of use cases, devices, ecosystem and the spectrum. Anshuman Thakur, strategy head for Jio, said that the telecom company is ready for 5G and has the network and backhaul in place. The only investments would now be in spectrum and electronic. But Jio too has voiced its opinion against the pricing recommendations for spectrum given by TRAI.
Airtel also shares the views of the industry in terms of the recommended pricing of the 5G spectrum and has called them to be “exorbitant”. Here’s what Gopal Vittal (CEO, Bharti Airtel India) had to say in an earnings call: “We’ve made it clear that for 3.5 GHz spectrum, the reserve prices indicated by TRAI in the ballpark of Rs 50,000-55,000 crore for 100 MHz are prices we can’t afford and they’re exorbitant. We would hope that the government brings down prices of the spectrum and that is when we would look seriously at 5G.”
Another top Bharti Airtel official added to the narrative by quoting this to ET – “It doesn’t make sense for us to buy at these levels when the ecosystem won’t be developing for the next two to three years,”. The person added that a telco would have to shell out that the INR 50,000-Rs 55,000 crore for 100 MHz, and service the debt for the next three years, despite having no returns.
Although Airtel isn’t allergic to the idea of deploying 5G. Airtel has deployed 100 hops of 5G technology transmission equipment that has been supplied by Huawei. According to Huawei, the equipment will deliver 1 Gbps capacity over a single 28 Mhz spectrum, improving the backhaul capacity by four times. But unfortunately, the government has been rather indecisive in accepting Huawei’s request to conduct 5G trials in India due to the controversy raised by the US.
Out of the three major telcos, Vodafone-Idea is admittedly the worst hit. With successive negative quarters, its total debt now stands at more than INR 1 lakh crore. And when you consider the fact that Vodafone-Idea currently has the lowest ARPU (INR 108) in the world, you get a better picture of its financial standing and its propensity to invest in 5G technology, yet.
In fact, Vodafone Group Plc Chief Executive Officer Nick Read has gone on record to say that Vodafone India could head towards liquidation if the government does not reconsider its demand of mobile spectrum fees. Given its current financial condition, there is considerable doubt if the telco will even participate in the upcoming 5G auctions.
So, when will 5G networks be available in India?
Well, there’s no solid answer to this question yet. With 4G penetration still being low in India, the commercial viability of 5G appears to be rather limited. Marry this with the fact that the Indian telecom industry is in the red, and it seems further unlikely that we’ll see 5G networks in India, at least for the next couple of years.
But it’s good to know that the low tariff rate regime in India is now over. After taking way more than they could, industry players are now increasing mobile tariffs by up to 50%. This is the first time it’s happening ever since Reliance Jio entered the industry. Such a drastic increase in prices is expected to bring significant revenue gains and hopefully will bring Indians closer to 5G deployment in India.