Spectrum Price, Migration to 5G Among Factors for Successful 5G Implementation: Ind-Ra

Ind-Ra, in a statement, listed out key factors that will impact the imminent 5G rollout in India.

5G in India faces some Stumbling Blocks - Ind-Ra

India Ratings and Research (Ind-Ra), listed the following factors that will impact 5G rollout:

1. High price of 5G Spectrum in India (current price: Rs 492 crore/unit).
2. Willingness of users to migrate from 2G/4G to 5G.
3. Capital that the telcos will spend to set-up full-scale commercial 5G networks.

These are some of the unknown variables that need to be addressed before 5G is implemented.

After the government gave the nod for starting 5G trials, the firm said that the spectrum price is too high.

“Although the 5G auctions are not yet announced, the reserve price could yield a return on capital employed of only 7%,” it added.

Second, there is still much doubt about how willing users are to switch from lesser generations to 5G. There is also the case of increased ARPU and how much increased pricing that people are willing to pay.

The firm said that the current ARPU ranged between INR 121 and 166, per user per month. It also said that more than 300 million users used either voice or 2G, which have significantly lower ARPU. Adding these factors, questions remain for the viability of 5G for telcos as a profitable venture.

Ind-Ra also commented on the financial credit profiles of Reliance Jio and Bharti Airtel. The former is on 'IND AAA’/Stable and the latter is on ‘IND A1+’.  However, the firm said that the extent of capex these telcos will incur on 5G over the coming years will also be a key monitorable.

5G Trials Start in India

The Department of Telecommunications on Tuesday approved 5G trials for six months. For that purpose, DoT allowed using the mid-band (3.2-3.67 GHz), mmWaves (24.25-28.5 GHz) and sub gigahertz band (700 MHz), along with their existing spectra in the 800 MHz, 900 Mhz, 1,800 MHz and 2,500 MHz frequencies, during this trial phase.

“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.