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2022 – Finally, a happy new year for the telcos?

As we come toward the end of 2021, the telecom service providers seem to be much more certain about their future as compared to last year. Telecommunication sector has seen a host of structural and procedural reforms as well as relief measures, breathing life into the telcos including the rationalization of adjusted gross revenue (AGR), bank guarantees against license fee/levies and interest rates; moratorium on payment of AGR dues as well as payment of spectrum; increase in spectrum license tenure; and FDI increase to 100 percent in the sector, to name a few key ones. These reforms would help unshackle the industry, driving investments and increasing competitiveness in the market (which looked headed toward a duopoly).

The timing of these reforms overlaps with the extensive 5G trials underway by the telecom service providers leveraging government-allocated spectrum in the 700 Mhz, 3.3–3.6 Ghz, and 24.25–28.5 Ghz bands earlier this year. The telcos have received extension on the trial spectrum, which would enable them to carry trials till May 2022.

With 5G spectrum auctions still 6 months away (tentatively in April–May 2022), telcos are heavily investing to increase capacities in their 4G networks, upgrading backhaul and transport networks, enhancing their spectrum portfolios, and enabling cloud and virtualization technologies in preparedness of 5G.

The first 5G commercial launches in 2019 across mature markets (Korea, US, etc.) were aimed at consumers predominantly, because the 5G standards applicable to consumers (known as 3GPP Release 15) were available first. While 5G would improve on congestion in densely populated areas providing an alternative to home broadband, the differential benefit in speed, mobility and availability might be too modest (especially for the ones with good quality 4G/LTE).

The new release (Release 16) of technology in 2020 promises to expand 5G to new services, spectrum, and deployment, unlocking 5G opportunities beyond the traditional mobile broadband services. The new release improves on the foundational aspects of 5G, in terms of coverage, capacity, latency, power, mobility, reliability, ease of deployment, etc., including ability to function in industrial environment as well as support unlicensed spectrum usage. With this new release, 5G is poised to drive massive changes in the way companies work, particularly in the manufacturing industry.

Focused 5G network roll outs (maybe initially in metros and Tier-I cities) in the initial phases of technology deployment as well as device eco-system challenges (with lack of budget 5G phones) might hamper B2C 5G proliferation in India, with predictions of mere 10–25 percent of all mobile subscriptions to be 5G in India by 2026. The new release of 5G technology, and the timing of anticipated commercial launch of 5G in India, has provided telcos with the opportunity to turn their focus on enterprise 5G. Based on estimates, only around 10 percent of the world’s machines had a wireless connection in 2020, which is comparable to the estimated 5 billion subscribers worldwide that would have mobile connections by 2025. Hence, the enterprise opportunity cannot be understated.

The service providers in India are forging partnerships across the value chain, including web-scalers, technology players, original-equipment manufacturers, and working with enterprise clients across sectors including manufacturing, logistics, healthcare to test 5G-based solutions. The telcos are closely working with start-ups to develop vertical/industry-specific 5G use-cases that could be deployed, meeting specific needs of the industry verticals. One of the service providers has launched an initiative recently to showcase use-cases for enterprises, leveraging the trial spectrum allocated.

The telcos have recently increased tariffs and the brightening prospects of the telecom service providers is warming up lending institutions as well. With the trifecta of positive reforms, advent of game changing technology, and improvement in overall financial outlook for the sector, 2022 could likely be the much-awaited Happy New Year for telecom service providers.

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