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Freedom at 75!

As India commemorates its 75th year of Independence, the telecom industry is on a roll. It is the second largest industry in the world with a subscriber base of 1.17 billion and an overall teledensity of 85.03 percent at the end of May 2022. With 1 billion installed devices and 920 million unique mobile subscribers by 2025, India is on its way to also becoming the second-largest smartphone market globally. It will soon boast of average broadband speeds of 50 Mbps, at a pan-India level.

The country is planning 5G rollouts soon, with an anticipated contribution of USD 450 billion from 5G to the Indian economy, in the next 15 years. 50 million 5G subscribers are expected by 2024. The amount of data usage per consumer is set to go up from 20 GB to 50 GB in 2027. If new uses cases are added, it could rise even further.

The telecom equipment industry is gearing up for investments to the tune of Rs 2-3 trillion on 4G and 5G over the next two years. The investment will be for hardware, infrastructure and software platforms, as well as applications and network connectivity. (Cloud storage and data analytics are another part of the ecosystem). With fiberisation at 35.1 percent, and more than 3 lakh km to be covered at pan-India level between FY23-FY25, a CapEx of Rs 2 trillion for the OFC manufacturers is a fair estimate. The towercos expect to invest Rs 2 trillion by 2025, half of it in the next two years. This will include deployment of the crucial small cells, and more larger towers.

While all these figures look impressive, it could take four to five years to build a reasonable sized pan-India 5G network with good coverage. The telcos’ debt levels are at an all-time high. Vi and Airtel’s net debt stood at Rs 1.96 trillion and Rs 1.6 trillion respectively in the quarter ended March, FY22, while Jio’s net debt was at Rs 577 billion in the June quarter, FY23. And, revenue from 5G services is expected to be marginal, for the next three years, contribution coming not from the increase in 5G tariff over 4G, but by increased consumption from what the new technology will offer.

5G handset penetration remains low in India at 15-20 percent. The shortage in semiconductor chips has resulted in an increase in price of 5G handsets. The 5G use cases, that will determine the revenue streams remain work in progress. And the nagging question remains, how much will the telco’s share in the revenue pie be, once the private networks have played their moves.

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