Jio with its acquisition of pan-India 700MHz spectrum is planning to create standalone (SA) 5G architecture, which has long-term advantages like superior quality ultra-low latency 5G experience, and differentiated and wider range of applications particularly for the key enterprise segment, JM Financial said in a report.
Hence, this might give Jio an opportunity to attract some of the high-ARPU customers from its competitors in the medium to long term.
However, Bharti plans to launch 5G services based on non-standalone (NSA) architecture, essentially using the same infrastructure used in 4G and adding a 5G layer on top of it.
This reduces capex significantly for Bharti as it saves on the expensive 700 MHz spectrum, reduces investment on related hardware upgrades for SA architecture, enables faster 5G deployments, and also cuts opex.
Hence, Bharti might not be at a disadvantage vs. Jio’s SA 5G architecture in the near to medium term as 5G penetration is low and 5G use cases are still being developed, the report said.
However, in the longer run, SA architecture is a superior quality network with a lot more capabilities that can be developed. As 5G picks up and use cases get developed, particularly in the key enterprise segment, there is a risk of Bharti’s network getting congested as the same infra is being used for both 4G as well as 5G services. In such a scenario Bharti might have to shift to SA architecture, and may need to acquire 700 MHz spectrum. Hence, Jio might have an edge in the long run as it would already have a well-functioning 5G SA infrastructure in place with superior quality 5G experience.
Bharti is targeting aggressive 5G roll-outs and plans to cover 5,000 towns with 5G by Mar’24. On the other hand, RIL’s FY22 annual report highlights that Jio has successfully carried out 5G testing across sites and has completed 5G coverage planning across 1,000 Indian cities based on targeted customer consumption and revenue potential using heat maps, 3D maps, and ray tracing technology.
In terms of monetisation of 5G, the management expects 5G to be monetised possibly via higher data consumption by 5G users in the interim, while development of more use cases, particularly for key enterprise segment, will help drive monetisation in the medium to long term.
“We believe Jio might continue to participate in tariff hikes given that it needs to also focus on profitability (and not just on subscriber additions) as it prepares for its potential IPO in the next 1-2 years and given the high capex requirement for 5G roll-out. Hence, we believe tariff hikes are likely to be more frequent, going forward”, the report said. Business Standard