With 5G slated to go live in most Asian countries by 2025, India faces some big challenges to overcome in order to get to 5G.
At the Shanghai leg of Mobile World Congress 2019, organised by GSMA, 5G was the theme through and through. From the exhibitors to the panelists at the tradeshow that happens in Shanghai’s New International Expo Center every year, everyone harped about the benefits 5G connectivity is poised to bring to users. And for good reason. As this decade comes to a close, the next generation mobile connectivity is set to go live in a lot of mobile markets, many of them in Asia. South Korea already has a functioning 5G network, while China is expected to start 5G rollout in 2020. Five more nations are also expected to roll out 5G this year including Australia and Phillipines, while in 2020, Japan, Macao, Malaysia, New Zealand, Singapore, Sri Lanka, Taiwan and Vietnam are expected to embrace 5G, at least to some extent. Now, India’s name is also on the list of countries expected to roll out 5G connectivity in limited capacity by 2020, but there are some dire challenges that India needs to overcome to unlock the next generation mobile network.
GSMA’s in-house research team, GSMA Intelligence, predicts the Asian mobile economy is split in two groups. One group which includes nations like South Korea and Australia are optimistic about the future of 5G and have already invested heavily in the infrastructure, while other nations like India are being cautious about it and continue to strengthen their existing 4G networks. The report states that for 5G to boom into the mainstream, policies should focus more on developing unique use cases to spur the demand for low-latency, high-bandwidth internet connectivity. Essentially, GSMA predicts that it won’t be the consumers, but the industries that will be leading the growth for 5G connectivity across the world. The idea of intelligent, connected solutions for cities, factories and the likes will take precedence at first, followed by more people buying 5G-enabled devices. This is opposite to how 4G came into being. A decade back, 4G was aimed primarily to improve the internet-consumption experience of consumers. 3G offered mobile broadband while 4G opened doors to unfettered video consumption, and now with 5G, while the difference in internet speeds will still be a significant improvement, the biggest impact will be on IoT and enterprise solutions. Heck, half of MWC Shanghai 2019 was about optimistic industries eager to try out 5G.
GSMA’s research claims that by 2018, 67 percent of the world’s mobile population came from Asia Pacific, accounting for 2.8 billion users in total. Asia has been the biggest contributor to subscription growth in recent years, while India and China make up for half of the world’s mobile population today. However, Asia won’t be able to sustain the high growth rate beyond 2020 because of saturation in highly penetrated markets and poverty, inequality and other social barriers in less developed, less penetrated countries. Despite that, GSMA predicts Asia will contribute 370 million new subscribers by 2025.
Out of the new subscribers, only a small minority will initially embrace 5G, 4G will continue to dominate in most markets. As a result, this period will be seeing heavy investments by network providers to strengthen infrastructure, but not immediate returns. This is primarily the reason why operators are apprehensive about investing. With the growth poised to stagnate, operators spent over $400 billion by 2018 driven primarily by growing economies like Vietnam and Indonesia. Japan, Australia and South Korea will also contribute heavily in investments, particularly to build their 5G networks, in 2019. The report states that by 2025, two-thirds out of the predicted $570 billion capital expenditure will be on laying down 5G networks in Asia.
With over 750 million unique subscribers, India is now a global giant in the telecom industry and the country is expected to add over a quarter of the world’s new mobile subscribers till 2025 to truly become the world’s second largest mobile market, second only to China with over 1 billion active devices. In India, 4G connectivity already facilitates easier payments, video and audio streaming, and digital government services.
Yet, while India enjoys the large subscriber base and extremely cheap rates for data, the overall financial health of the telecom operators is still quite weak. Questions can be raised over the sustainability or the financial capacity of Indian telcos to upgrade to 5G networks at par with its Asian peers.
According to a study done by GSMA Intelligence, India needs to address three critical aspects to become 5G ready — Substantial investment in infrastructure strengthening digital connections that should come from private bodies, a trust-based digital environment where people are encouraged to avail essential services over the internet and a policy that enables all this.
India should also offer affordable, sufficient and exclusively licensed spectrum across the three key frequency bands for 5G networks. The spectrum in India is allocated based on auctions. There are also caps on spectrum purchasing to prevent concentration in one hand.
India also went through a wave of consolidation in the telecom industry. In 2016, there are were over 10 network providers battling out among themselves. By 2018, India was left with only four. Three privately owned and one government owned. This was primarily a result of Reliance Jio’s entry which single-handedly brought down the Average revenue per user to such drastic levels that many had to leave the market altogether. In essence, India has the lowest ARPU among all Asian countries.
While that’s certainly good for the customers who now enjoys super cheap data and unlimited voice calls and what not, the operators had to keep borrowing to ensure price stability. As a result, nearly all the telecom operators are under huge debts. Yet thanks to the significant opportunity to onboard the millions of feature phone users to smartphones, operators still have hope. Capital expenditure, as a result, is still higher than the Asia Pacific average, but is forecast to slow down after 2020 when most of the existing networks have been modernised.
To become a leader in 5G technologies, Indian operators have to figure out a way to decrease their debts and invest more in modernising networks. GSMA predicts around 5 percent of mobile users will be on 5G by 2025 in India. Further to aid swift adoption, the government should revise the spectrum pricing which is still quite high. On an average, the final spectrum prices in developing nations like India was about three times higher than the spectrum prices in developed markets when you take into account income levels of the population. The spectrum auction for 5G is slated to held in the second half of 2019.
There is also a big impact of regulatory taxes that’s imposed on operators which further slow down the deployment of infrastructure in the country, reduce profitability and increase debts.
To improve the viability, GSMA suggests India to revise its legacy regulatory policies to suit the modern needs better, bring down the price of spectrum and support operators with a new taxation policy that encourages further investment.
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