MUMBAI: As telecom operators gear up for successful implementation of 5G in India, there are still a lot of variables and unknowns that need to be addressed, according to India Ratings and Research (Ind-Ra). First, the reserve prices for 5G auctions are too high.
Although 5G auctions are not yet announced, the reserve price could yield a return on capital employed of only 7 per cent. Second, the number of users willing to switch to 5G from 4G/ 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 to 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.
Third, the extent of capex these telcos will incur on 5G over the coming years will also be a key monitorable, said Ind-Ra, although the financial credit profile of Reliance Jio and Bharti Airtel is comfortable. The Department of Telecommunications has permitted four telcos — RJio, Bharti Airtel, Vodafone Idea and Mahanagar Telephone Nigam — to conduct trials for initial duration of six months, including two months for procurement and setting up of equipment. Telcos are already gearing up for 5G implementation for the past 6 to 12 months. RJio is already working on using an indigenously developed network, hardware and technology.
Bharti Airtel announced of successful demonstration of its live 5G services over a commercial network in Hyderabad during February.
