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Willingness to switch to 5G, higher capex by telcos key for successful 5G implementation: Ind-Ra

Willingness to switch to 5G, higher capex by telcos key for successful 5G implementation: Ind-Ra

The number of users willing to switch to 5G from 4G or 2G and the incremental average revenue per user (ARPU) that they are willing to pay need to be watched out for.

The extent of capex telecom service providers incur on 5G over the coming years will also be a key monitorable, Ind-Ra said. The extent of capex telecom service providers incur on 5G over the coming years will also be a key monitorable, Ind-Ra said.

Higher price of airwaves, willingness of customers to switch to 5G and pay more, and the capital expenditure to be incurred by telecom companies to deploy the technology are among some of the key factors which will determine successful implementation of 5G technology in the country, India Ratings and Research (Ind-Ra) said.

"...the reserve prices for 5G auctions are too high. Although the 5G auctions are not yet announced, the reserve price could yield a return on capital employed of only 7 per cent," the rating agency said.

The number of users willing to switch to 5G from 4G or 2G and the incremental average revenue per user (ARPU) that they are willing to pay need to be watched out for. "With the current ARPU ranging between Rs 121-166 per user per month, and more than 350 million subscribers still using voice only 2G services with significantly lower ARPU, the viability of 5G for the telcos remains to be seen."

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Besides, the extent of capex telecom service providers incur on 5G over the coming years will also be a key monitorable, although the financial credit profile of Reliance Jio Infocomm ('IND AAA'/Stable) and Bharti Airtel (debt rated at 'IND A1+') is comfortable, it said.

The Telecom Department on Tuesday gave permission to telecom service providers to conduct trials for use and application of 5G technology.  

Besides Airtel and Reliance Jio, Vodafone Idea and MTNL are the other telecom service providers which will participate in the trials, whose duration is for six months, including a time period of two months for procurement and setting up of equipment.

The companies will be given experimental spectrum in various bands including the mid-band (3.2 GHz to 3.67 GHz), millimetre wave band (24.25 GHz to 28.5 GHz) and in Sub-Gigahertz band (700 GHz). Besides, they will also be permitted to use the existing spectrum owned by them.

"The move will also help determine the viability of this new technology across the nation, since the telcos are required to conduct trials not only in the urban areas but also in the rural and semi urban areas," Ind-Ra said.

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