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Here's What the Next Steps in India's 5G Path Could Look Like

Here's What the Next Steps in India's 5G Path Could Look Like

The big-ticket 5G spectrum auction has netted a massive sum for the government. It is now over to telcos to monetise the spectrum, while consumers can look forward to a bouquet of services.

5G spectrum auction in India has led to a lot of happy faces5G spectrum in India has led to  a lot of happy faces 5G spectrum auction in India has led to a lot of happy faces5G spectrum in India has led to a lot of happy faces

The auction of 5G spectrum in India has led to a lot of happy faces. The government is pleased at garnering more than Rs 1.5 lakh crore, beating all expectations as well as past revenue figures for spectrum auctions. Industry watchers are beaming as this will set in motion the next phase of India’s data revolution, giving consumers access to ultra-high speed data, and put the country on the global 5G map. And telecom operators who won 5G spectrum are smiling as they can use this precious commodity in a multitude of ways—data finally is the new oil.

Amid all this happiness, there are two key takeaways: one, the debt on the balance sheets of the three big telcos—Reliance Jio, Bharti Airtel and Vodafone Idea—which paid large sums of money for the spectrum; and two, what is in store for the consumer who is looking for high-speed data at an affordable price.

The 5G spectrum auction was arduous. It took a week and over 40 rounds of bidding for the auction to conclude. Of a total of 72.09 GHz put out, 51.23 GHz, or over 70 per cent, was picked up. Reliance Jio spent Rs 88,078 crore followed by Bharti Airtel and Vodafone Idea (see table ‘5G Spectrum Auction’). Before this auction, the highest revenue figure was Rs 1.13 lakh crore, which the government had garnered in 2015 from the auction of 2G and 3G spectrum.

“As expected, most of the spectrum barring 1,800 MHz was sold at the base price. There was enough on offer in the 5G bands for all the three telcos to buy,” says Neerav Dalal, AVP (Research), MIB Securities India. With spectrum in their possession, operators can now look to offer a diversified suite of offerings across the spheres of mobility, data and enterprise.

At the outset, it brings to the table several ways to monetise existing businesses and look for new opportunities—this encompasses areas such as education, agri-tech, e-commerce, banking and fintech. “A good 5G network becomes the backbone and the ability to get the best out of blockchain and AI, for instance, is easily achievable,” says Deven Choksey, MD of KRChoksey Securities. Jio’s aggressive strategy, he adds, goes well with the company’s fibre network. “Critical and time-based applications that include fintech and operations in a plant will benefit greatly. Jio already has a B2C play and now can play the host and strengthen its presence in both B2B and B2C.”

With India’s mobility story already on a good wicket, the focus now shifts to the enterprise. The Adani Group’s decision to buy 5G spectrum (they have spent a relatively small sum of Rs 212 crore) is viewed as largely for captive use. For those looking at larger opportunities, like Reliance, it gives them a shot at being a larger infrastructure player. “There is a story in creating an information highway or just upping the 5G game with dedicated bandwidth. Over time, mobility will be a small part of their business,” says Choksey. The 5G option will also help the company monetise the digital broadcasting rights for the showpiece Indian Premier League (IPL) cricket tournament that are with Viacom18—which is backed by Reliance. “Their fibre infrastructure coupled with spectrum can place them in a very strong position.”

A major concern has been the debt levels that the telcos are taking on at a time when tariffs in India are amongst the lowest in the world. “Yes, debt will increase but with the payment terms relaxed or distributed over 20 years, the stress on cash flow may not be material,” points out Dalal. The immediate outgo was the first instalment, which was paid within 10 days of the auction concluding.

“The government expects spectrum allocation to conclude by the second week of August 2022 and the roll-out of 5G services to begin from October 2022. While the purchased spectrum is sufficient for coverage across the country, achievement of complete coverage is expected to take a couple of years,” says a recent report by rating and research firm CareEdge.

The consumer angle

The interesting part is how the shift to 5G in India has quietly taken place at the consumer’s end. Satish Meena, an independent technology analyst, points out that a quarter of all smartphones currently used in India are 5G compatible. Expectedly, a large proportion of the user base is the younger audience, for whom technology is a big attraction.

“By the end of this year, the proportion of 5G handsets will easily be at 60-70 per cent,” says Meena. As usage takes off on the back of this new technology, he sees the emergence of new areas. “Content consumption will be big as live streaming becomes easily accessible. Besides, there is an opportunity emerging in live shopping, which is very popular in China,” he says. Simply put, you buy products that are promoted on live streaming. Finally, there is the new way of hybrid working, for which a reliable high-speed connection is critical.

However, 5G won’t be made available across the country in one stroke. Going by recent announcements, telcos are expected to take a gradual approach by first rolling out services in the metros and then the rest of the country. That is no different from how 3G and 4G panned out—in fact India is unique because all three technologies could well exist simultaneously for a while. For the user base, it is not only about watching OTT platforms or an IPL match live. Dalal says 5G has an important role in achieving digital inclusion goals, among which are broadband for all, smart cities and smart agriculture. “The best example would be healthcare through remote patient monitoring using AR and VR, among other things.”

The entry cost or the pricing of 5G handsets will be closely watched. According to Meena, the average selling price of a 4G handset is less than Rs 20,000 today, while the corresponding number for 5G is around Rs 24,000. “It makes sense for consumers to go for a 5G handset and with more volumes, prices will inevitably drop.” Given the large number of payment options (EMIs, for instance), handset manufacturers are unlikely to spare any chance to get a healthy slice of this market. In terms of speed, the thumb rule for 5G is 100 Mbps, though that will vary depending on how much money is invested on the network. The broad consensus for 4G is that it is in the range of 60-70 Mbps.

From paying over Rs 200 per GB to rock-bottom prices for 4G data (for instance, today’s consumer gets free domestic calls with 2GB of data daily at just over Rs 700 for a three-month period), the outgo for 5G is something the operators need to look at carefully. Tariffs have gradually increased over the past couple of years (by around 20 per cent) and it may not be too difficult to take tough decisions in a market dominated by three players. The question is, can tariffs be raised in the name of 5G alone? Choksey thinks a subscription programme may be one tack, which creates a new revenue stream. “A large player like Jio can now become a host and offer many services to its base. The payment arrangement will be between Jio and the app provider.” That is not very different from the aggregator approach that JioTV has, with the consumer paying for what she wants. “The consumer will be charged a reasonable price for 5G and can pick and choose what they want.” If indeed a subscription model is worked out, consumers will have little reason to complain.

As things stand, there is a good chance that 5G adoption in India may follow the path taken by its predecessors; both 3G and 4G took a while to get moving but once handset prices and tariffs moved south, there was no looking back. Those who have cut the big cheques will be hoping for an encore with 5G.

 

@krishnagopalan