India May Not Lag China On 5G

With Reliance Jio Infocomm (RJio) expected to roll out 5G services in the second half of the calendar year 2020 (H2CY20), albeit selectively, India may not lag China in launching the services. On 4G, India was behind China in rolling out the services by 2-3 years, according to a note by SBICap Securities.

“To maintain market leadership, we see RJio moving soon to 5G (H2CY20),” it said.

Jio’s early 5G move is likely to be driven by the recent capital rise by incumbent telcos (both Bharti Airtel and Vodafone Idea). The incumbents are seen raising as much as $10 billion through various initiatives (amount raised likely to be $16 billion if tower sales go through) and most of the funds are likely to go into boosting 4G capacity, the note said.

Earlier in February, RIL President Mathew Oommen told BusinessLine that RJio is ready to launch 5G services in India, immediately after the spectrum allocation. RJio, a wholly-owned subsidiary of Reliance Industries Ltd (RIL), is the only operator in the country which is ready for 5G, he added.

If the entire $16 billion raised is deployed in 4G networks, Vodafone-Idea and Bharti may add a combined incremental capacity of about 425 million 4G subscribers over the next 24 months. In the interim, Jio may continue to gain market share as incumbents, particularly Vodafone Idea, are faced with complex network integration and spectrum re-farming.

“We see Jio gaining share and achieving revenue market share of about 39 percent by the financial year 2021 (from current about 30 percent), Vodafone Idea’s RMS declining to 25 percent (from 30 percent) and Bharti holding ground. However, post-network integration and 4G capacity boost, incumbent telcos are seen narrowing the 4G gap versus RJio,” it said.

The note also said RJio would hike tariffs by at least 15-20 percent driven by increased investments in 5G upgrade. The company’s tower monetization may be an additional and early catalyst for price hike of about 6 percent over the next 6—9 months.

Tower consolidation

Despite significant consolidation in India’s wireless space, the country’s telecom tower sector remains fragmented with three tower companies.

“As such, we believe consolidation is very likely in the power sector. Also in the 5G era, all towers will be of value as 5G is all about network densification,” it said, adding, tenancy growth would remain “muted”.―The Hindu Business Line