India’s 5G Conundrum: Mass Adoption not seen till 2023-2024!

by Hetal Gandhi (edited by Alan J Weissberger)

The writer is a Director at CRISIL Research

As the noise around India’s upcoming 5G spectrum auction rise, one must remember that ecosystem development is crucial to the success of next-generation technology. India is yet to complete the transition from 2G and 3G to 4G-LTE.  But the march towards 5G is inexorable and necessitates giga-buck spending. Telcos have already invested more than Rs 3 lakh crore (India money) over the past three years, and a large portion of that money has been used to roll out 4G-LTE networks across the country, and we are still counting.

The implementation of any paradigm-shifting technology spawns manifold ecosystem changes such as spectrum usage, network infrastructure and devices. While newer bands will be made available for 5G services in India, the reserve price for the spectrum bands, recommended by the Telecom Regulatory Authority of India (TRAIat around $0.23/MHz/pop (for metros), is almost twice compared to $0.12/MHz/pop auctioned in the UK in June 2018.

At TRAI’s pricing, owning a block of 20 MHz spectrum across circles in the 3.3-3.6 GHz band will cost a staggering Rs 98,000 crore or so. Also, high-frequency bands such as these will require more investments in cell sites because of their low-propagation characteristics.  Even though a combination of sub-1 GHz and 3.3-3.6 GHz is ideal for the 5G rollout, prices in the 700 MHz band remain very high while the rest of the sub-1 GHz bands will be mostly utiliszd for 2G (voice) and 4G-LTE services.

The government seems ready to conduct the 5G auction towards the end of 2019, but it is imperative for telcos to check the readiness of their ecosystems before plonking down truckloads of money to buy spectrum. On the other hand, if the US and China successfully adopt 5G by 2020 as expected, subsequent adopters will have the benefit of lower network equipment and device costs, thus making the ecosystem transition smoother.

An important 5G ecosystem prerequisite, essential to building use cases, is optic fibre networks. But India lags far behind with lower than 30 per cent use of fibre as on date compared to more than 70 per cent in the US and China. CRISIL Research estimates that India needs to lay another 10 lakh fibre km to be 5G-ready. That will require an investment of over Rs 1 lakh crore.

Nearly three-fourths of this cost will occur to get right-of-way (RoW) approvals, which can be as high as Rs 1 crore per km in metros. We believe it will take three-four years for telcos to reach the required fibre levels, given delays in RoW and other permissions.

For telcos, getting RoW approvals has been as much an issue as making investments and RoW issues may delay fibre deployment. However, leasing of fibre can significantly reduce the investments required, depending on sharing modalities, and it will also make India 5G-ready sooner.

Furthermore, the Indian telecom industry is struggling under a massive debt load of Rs 4 lakh crore (as of March 31, 2018). In the recent past, a combination of asset and stake sales and sponsor support have helped telcos maintain their debt levels. But bundling of voice with data amid a price war, coupled with high investments, has resulted in low returns. We now see low single-digit returns on the capital employed in the industry compared to more than 15 per cent three-four years ago. So, telcos need to explore areas of revenue generation to make such investments viable.

While 5G-enabled devices are expected to enter India in late 2019 or early 2020, it may take another three-four years before mass adoption of affordable versions takes place. With the number of interconnected devices rising, the Internet of things will unfold newer revenue streams across domains such as healthcare, education and transportation. A lot is in store for Indian telcos, but things will not take a clear shape before fiscal 2023.

Copyright 2019. Living Media India Ltd

2 thoughts on “India’s 5G Conundrum: Mass Adoption not seen till 2023-2024!

  1. The India government expects a 5.8% increase in revenue at Rs41,519.76 crore in the fiscal year 2019-20 from the stressed telecom sector against the revised revenue estimate of Rs 39,245 crore for the current fiscal year ending March 31, according to the interim budget documents.

    The government earns revenue in the form of mainly licence fees and spectrum usage charges (SUC) from telecom operators, which is calculated based on the adjusted gross revenue (AGR) of telcos.

    Revenue from the sector though has been falling over the last two years due to severe financial pressures faced by India’s mobile phone operators owing to the ongoing price war, which has meant lower license fees and SUC for the government.

    Also, the price war has led to rapid consolidation of the industry which has now shrunk to three private sector players – India’s older telcos Bharti Airtel and Vodafone Idea, and latest entrant Reliance Jio – from over eight about two years back. As a result, the government had made a provision of Rs 48,661.42 crore revenue from telecom services in 2017-18, but has revised it downwards, as per the documents. The government had raised Rs32,065.90 crore in FY2017-18.

    Spectrum sales through auction has been main contributor to the government revenue. However, no auction was conducted in the current fiscal year and the latest estimates for the next fiscal year also don’t appear to factor in any auction proceeds.

    The debt-ridden incumbent carriers have opposed any early auction, while the government has indicated that the next spectrum sale could happen after August 2019.

  2. Samsung ready for 5G trials; says India will come up with local 5G use cases

    Korean telecom gear maker Samsung said India will come up with its own 5G specific use cases that could be applicable to other markets and it will ensure that those use cases are supported by the company.

    “Government as part of the 5G forum included many of other partners who are focusing on identifying specific use cases [for India]. We just want to make sure the technology is available to support any of these uses cases,” Srini Sundarajan, Samsung India Senior Vice President and Head (Network Business), told ET in a recent interaction.

    India has some different sets of needs and the focus of the government is to develop 5G use cases around farming, education and next-gen manufacturing.

    “Education is something we are working with Japan that will be very useful for India… there are many use cases which have a lot of societal value and that could also play a big part on the 5G rollout,” he said.

    Sundarajan said that the company is working with the telecom department to help devise the 5G roadmap for the country. “Our goal primarily is to work with the DoT and ensure that we are able to show the value of 5G to all relevant people in government and partners of the government,” he added.

    The Narendra Modi government aims to kickstart the deployment of ultra-high speed 5G networks in the country by 2020.

    The company said that it is ready for 5G field trials in India, and is awaiting clarity from the telecom department (DoT). “We agreed that we will do trials with the government. But the clarity has to come from the government on various things.”

    Samsung said that it is ready to support 5G services on both 3.5Ghz and 26-28Ghz in India. 5G services using the mid-band or 3.5GHz will power use cases such as surveillance, smart city, and smart factories among others. Fixed wireless access (FWA) could become one of the main use cases of 5G using the 28Ghz band, Sundarajan said. In India, Samsung is the sole 4G equipment provider for Jio’s pan-India network and is also a technology provider for the telco’s narrowband IoT network.

    “We are agnostic since we have commercial deployments on both sides. We are opening up and showing these use cases. Depending upon where the interest comes both from government and operators, we will drive those use cases,” Sundarajan said.

    The much-anticipated 5G field trials have hit the policy roadblock with the department of telecom (DoT) wireless planning and coordination wing (WPC) averse to allocating airwaves beyond 90 days, which according to industry, would not serve any purpose.

    On February 25, the department has formed a committee with representation from the academia, industry and the government, to make recommendations related to licensing for carrying out 5G pilots, and also asked for the quantum, size, price and other aspects for offering experimental spectrum.

    The telecom department had previously invited vendors like Ericsson, Samsung, Nokia, Huawei and Cisco to conduct 5G field trials in the country and test use cases. The department is expected to provide 100MHz of spectrum for these field trials in the country, along with the backhaul support.

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