Just eight months after the launch of the 5G roll-out in India in October 2022, this high-speed network is now fully operational across the country. An estimated 25 million users are already using 5G and are enjoying speeds significantly higher than that of 4G LTE networks. Apart from individual users, the corporate segment is actively exploring the establishment of 5G networks for enterprise applications and examining its various use cases.
The speed and scale of the 5G deployment are truly impressive. The two major telecom service providers responsible for the roll-out so far, Reliance Jio and Bharti Airtel, have already surpassed their coverage targets for the next three years, displaying exceptional progress.
In May 2023, the 5G network in India achieved the milestone of crossing 200,000 mobile sites. The initial 100,000 5G sites were deployed within the first five months of its launch, and the next 100,000 sites were added in the following three months.
Airtel 5G Plus and Jio’s True 5G services are now available in over 3,500 towns and villages, including far-flung locations such as the Andaman & Nicobar Islands and Ladakh. Jio aims to complete the 5G roll-out by December 2023, while Airtel aims to complete its roll-out by March 2024. Both operators are offering unlimited 5G data at prevailing 4G tariffs to attract widespread usage.
Despite a late start owing to delays in spectrum auctions, India’s 5G roll-out soon picked up pace. The auction for 5G spectrum in July-August 2022, worth approximately Rs 1.5 trillion, was swiftly followed by network deployment in October during the same year.
Jio invested over Rs 880 billion to acquire 24,740 MHz of spectrum, primarily in the 700 MHz and 1800 MHz bands. Airtel secured spectrum worth Rs 430 billion for 6,228 MHz, while Vodafone Idea (Vi) committed Rs 188 billion and Adani Data Networks, a unit of the Adani Group, made modest purchases of Rs 2.1 billion for 400 MHz of spectrum in only 26 GHz band across six cities, purely for its captive private network needs.
The government’s reforms and regulatory bodies played a crucial role in providing an impetus for faster 5G roll-out. The terms for spectrum sharing, trading, leasing and surrender were eased, while procedural reforms were introduced in wireless licensing, such as the delicensing of various frequency bands to promote innovation, indigenous manufacturing and export. The National Frequency Allocation Plan 2022 aims to provide network planning guidance, and changes made in the adjusted gross revenue accounting method will further ease future burdens.
In August 2022, the government made amendments to the Indian Telegraph Right of Way Rules (RoW), 2016, to facilitate faster and easier deployment. These amendments enable deployment of 5G small cells and optical fibre cables on existing street infrastructure, while simplifying processes and rationalising fees associated with RoW permissions. Additionally, the Gati Shakti National Master Plan, launched in October 2022, is being utilised to identify appropriate street furniture for 5G cells through the NMP portal, which serves as the coordination platform.
Policymakers have encouraged the use of the IIT Madras test bed for research and development (R&D). The government has also allocated funds to set up 100 labs to develop 5G use cases. It has introduced a production-linked incentive (PLI) scheme to encourage 5G-specific R&D and manufacturing of 5G-related equipment and software. Further, India’s first 6G test bed has been launched through the Bharat 6G Vision Document, only six months after 5G’s commercial launch.
The government is now planning subsequent 5G spectrum auctions. The Department of Telecommunications (DoT) plans to conduct an estimated Rs 2.5 trillion worth of auctions in January-February 2024. This round of auctions may include spectrum above the 37 GHz band, also known as the millimetre wave (mmWave) band. Airwaves in 11 bands, ranging from 600 MHz to above 37 GHz, are expected to be available for bidding. Of this, approximately 88,000 MHz of spectrum is expected to be in the above 37 GHz band. Additionally, unsold spectrum from previous auctions, along with the remaining bandwidth from licences expiring in 2024, will be offered. However, with only Reliance Jio and Bharti Airtel in the fray, there may be limited bidding intensity.
According to a study conducted by Ookla, the median download speeds across India have increased by 115 per cent, from 13.87 Mbps in September 2022 to 29.85 Mbps in January 2023. India’s position on the Speedtest Global Index has improved by 49 places, advancing from the 118th to the 69th position during the same period. Moreover, 5G investments have increased 4G LTE speeds, as part of the underlying infrastructure modernisation process. Improvements have been made in LTE speeds in multiple cities, as operators have offloaded 4G traffic on to 5G networks, reducing congestion.
Meanwhile, despite commendable policy efforts, industry players and stakeholders are urging both the central and state governments to address certain areas for further improvement. For example, the Cellular Operators Association of India (COAI) has asked for power tariffs to be charged at industrial rates rather than commercial rates, which most of the states are currently charging from the telecom industry. There is significant difference between these two tariffs in most states, and given the need for 24×7 power, this proposal, if implemented, could lead to substantial savings. COAI has written to states, advocating for industrial power tariffs and prioritising electricity connections to ensure uninterrupted operation of base transceiver stations (BTSs) and telecom towers. Additionally, COAI is pushing for load aggregation and for telecom sites to avail green open access energy. Allowing load aggregation from multiple towers and availing green power generated at distant locations would ultimately reduce the economic burden. In return, this would help the development of 5G networks for new and innovative use cases in areas such as education, healthcare and agriculture.
COAI has also called for lower levies by suggesting a reduction in the licence fee from 3 per cent to 1 per cent and a deferral of the 5 per cent universal service obligation levy till the Rs 647.74 billion corpus, which has not been utilised yet, is deployed.
Another disappointment, in terms of policy, is in the approach to private networks. DoT has decided against providing 5G spectrum directly to enterprises for captive private networks. According to DoT, it would not be feasible to directly allot spectrum to enterprises for private networks under the present legal framework. Enterprises can roll out their captive networks utilising options already notified earlier.
Apart from the obvious benefits to users in terms of the current use cases, the high speed and low-latency nature of the 5G network supports a large number of new enterprise use cases. Allowing captive private networks would facilitate the expansion of enterprise usage.
For example, 5G has the potential to enable a huge expansion of IoT usage. According to an International Data Corporation (IDC) report, approximately 12.4 per cent of telecom carrier respondents in the Asia-Pacific region consider industrial IoT as one of the most important reasons for rolling out 5G, since IoT devices require highly dependable and faster communication.
Manufacturing facilities across the Asia-Pacific region have implemented private or dedicated networks for controlling equipment on premises. Digital transformation can be easily achieved with the help of private 5G networks.
In this space, Airtel has demonstrated several use cases in the past year. It launched the first private 5G network at its BOSCH facility in Bengaluru and partnered with Mahindra & Mahindra to make its Chakan manufacturing facility, India’s first 5G-enabled auto manufacturing unit. Similarly, Apollo Hospitals has also rolled out 5G-enabled services. 5G technology has the potential for multiple use cases across healthcare, agriculture, smart manufacturing, education, gaming and drones, which will only lead to its greater uptake.
This is only the beginning of 5G penetration. Currently, only two networks are operational, but greater competition would stimulate stronger uptake.
According to Ashwini Vaishnaw, Union Minister of Communications, Electronics and Information Technology and Railways, BSNL is set to start 5G roll-out by the end of this fiscal year, leapfrogging 4G, which it will also roll out. This requires an infusion of Rs 890 billion from the government, which is also exploring the amalgamation of BSNL with Bharat Broadband Network Limited. Mobile network operator Vi is also said to be actively seeking funding for its 5G roll-out plans. For both these cash-strapped service providers, BSNL and Vi, substantial investment required for 5G roll-out is posing as the stumbling block. If they do not roll out 5G soon, they might lose out on high-ARPU customers to their competitors, Reliance Jio and Bharti Airtel, already surging ahead with the 5G roll-out.
However, the Adani Group is the “dark horse”. It has bought spectrum in the mmWave band, but is likely to face challenges in meeting its year-one 5G roll-out obligations. Adani Data Networks is reportedly requesting an extension of the deadline (August 2023) to fulfil its initial roll-out obligations. They may seek more spectrum in the next round of auctions to power viable use cases. The company is unlikely to offer commercial services as servicing its own needs would require substantial investments across sectors such as ports, power, airports and gas.
Currently, of nearly 750 million mobile broadband users, about 85 million handsets are 5G-enabled. In th
e past year, IDC reported that the share of 5G smartphones in the Indian smartphone shipment market grew from 31 per cent in the first quarter of 2022 to 45 per cent in the first quarter of 2023. The average selling price reached an all-time high of $265, with the share of smartphones priced over $600 increasing to 11 per cent, compared to 4 per cent in 2022. By the third quarter of financial year 2023-24, 5G handsets will account for over 50 per cent share of smartphone shipments in the country, while the share of low-priced 5G smartphone penetration will increase.
The 5G uptake is dependent on tariffs remaining economical – preferably staying the same as those of 4G. However, operators expect a slower 5G uptake until enterprise use cases catch up with technological capacity. Hence, they are not in a hurry to raise tariffs. Besides, 5G data can be delivered more economically than 4G in terms of power usage (and therefore, sustainably), and operators are, therefore, looking at decongesting 4G networks by offloading on to 5G. It is likely that there will be no tariff hikes for 5G, at least until mid-2024.
According to CRISIL estimates, about a third of wireless data users, that is, about 300 million subscribers, will switch to 5G by March 2025. In contrast, the adoption of 4G services was faster, with approximately 60 per cent of data users migrating within two years of its launch, driven by better speeds than 3G, at remarkably cheaper tariffs.
IDC predicts that Asia-Pacific 5G connections, for both mobile subscribers and IoT, will grow from 574 million in 2021 to 3,234 million in 2025, growing at a five-year compound annual growth rate of 87.9 per cent. According to the IDC Carrier Transformation Survey 2022, most telecom operators consider manufacturing, smart cities with smart mobility and smart buildings to be critical use cases.
Meanwhile, there are key technical differences between Jio and Airtel networks. Airtel operates in non-standalone (NSA) mode using a 4G core, making it easy to expand quickly. Jio, which owns 700 MHz spectrum across the country, is deploying standalone (SA) 5G with a core that has additional features. Airtel’s deployment of 5G in the NSA mode means that it can deploy 5G BTSs alongside 4G equipment, reducing the time required to set up the network. Both Airtel and Jio will have plans to leverage 5G technology to deliver fixed wireless access (FWA). The bottleneck here is that a router, which is a customer premises equipment (CPE), costs around $180-$200 per piece, making FWA service expensive. However, the PLI scheme includes 5G CPE such as FWA, allowing companies to avail financial benefits for manufacturing the equipment indigenously. If production scales up, the cost of CPE could drop significantly.
Equipment manufacturers are optimistic that India will follow global trends of demand increase and deployment of private networks. Networking giants, operators and system integrators have been increasingly investing in private 5G businesses. There have been tie-ups between key ecosystem players for private 5G solutions. Besides, firms in sectors such as manufacturing, agriculture, mining and education are planning to digitally transform their operations. The mapping of street furniture is underway to facilitate 5G deployment. Detailed information obtained through analysis of the shortest distance, 5G planning and RoW will enable quick deployment of 5G BTSs and optical fibre.
Several use cases, such as smart classrooms, precision farming and intelligent transport systems, have already been identified. While tariffs have not changed, the spurt in data consumption, especially during the pandemic, has resulted in the average monthly data consumption rising to approximately 20 GB. With the introduction of 5G services, users are expected to upgrade to larger data packs. Thus, the average monthly data usage per subscriber is expected to reach approximately 24 GB in fiscal year 2023-24 and is set to rise even further. This will, to some extent, drive ARPUs, which may cross Rs 200 in financial year 2024, compared to Rs 175 in financial year 2023. Sector revenues could rise to 18-20 per cent in this fiscal. However, the potential for accelerated growth in the medium term is immense due to operators offering technology-neutral pricing to drive adoption. As more 5G retail use cases emerge, demand is expected to rise, which could potentially lead to tariff hikes. Nevertheless, the accelerated pace of 5G deployment by telecom operators will increase capex intensity, but their inability to charge premium tariffs imposes limitations on the return on capital employed (RoCE). Also, the telecom tower industry is facing difficulties due to Vi’s receivables, as the benefits of the 5G roll-out are being back-ended. As tower companies have to pay for fuel upfront, lack of visibility on the recoverability of pending dues (despite significant provisioning) is a cause for concern. Indus Towers has already written off about Rs 50 billion of receivables owed by Vi.
Net, net, the 5G roll-out has been successful so far, having grown at a rapid pace. Going forward, it has enough potential for operators to expect significant returns on investment and RoCE in the next two to three fiscal years. However, addressing policy gaps and encouraging increased competition in the 5G space would be crucial for sustaining this growth momentum.
Devangshu Datta
