The biggest gap in Jio, Airtel and Vodafone’s 5G ambition

India’s telecom operators Reliance’s Jio Infocomm Ltd., Bharti Airtel Ltd., and Vodafone Idea Ltd. are likely to face challenges in execution and development of 5G ecosystem, according to BofA Securities and Credit Suisse. The key, they said, will be developing use cases to generate demand for 5G services.

“Unlike 4G where ‘watching video’ turned out to be a killer-app enticing users to move to 4G, we are not seeing anything similar in 5G yet to entice users to move to 5G,” Sachin Salgaonkar and Priyank Mahajan, research analysts at BofA Securities, wrote in a Sept. 5 note.

“In an emerging market like India, we need to see good killer apps for uptake of 5G,” they wrote. “In our view, better video resolution will unlikely be a killer app.”

“Globally, most of the 5G use cases are fixed wireless access connectivity, AR/VR immersive experiences, gaming, etc.” they said. “But none of them are at meaningful scale. Mass-scale unique apps are key for 5G to pick-up.”

If India doesn’t see good use-cases appealing to a mass audience, the note said, then Jio’s first-mover advantage in 5G could be neutralised.

“Bharti could either buy 700 MHz or refarm its 900 MHz overtime to use it for 5G,” the note said. “Some apps which have potential to be key apps are cloud gaming given low latency needed, but could be a niche app currently.”

In Reliance Industries Ltd.’s 45th annual general meeting, Reliance Jio Chairman Akash Ambani focused on using 5G network for creating an immersive watching experience in the IPL, with the broadcast rights secured with them. “We believe Reliance could have a differentiated immersive offering of watching cricket matches with a unique 5G experience,” Ambani had said.

Jio (Standalone) Versus Airtel (Non-Standalone)
Jio has announced a standalone 5G rollout, whereas Bharti Airtel will be adopting a non-standalone 5G network. Research analysts at Credit Suisse, Viral Shah and Varun Ahuja, wrote in a Sept. 5 note that while a non-standalone network is relatively cheaper to deploy, it does not support true 5G functions of low latency and network slicing—both essential for eventual 5G enterprise use cases.

“We believe that Airtel would also transition to standalone 5G eventually,” the note said, as the enterprise use cases evolve. “Having said that, we do expect that Airtel may have to acquire additional sub-1 GHz spectrum over the next 3-4 years.”

Credit Suisse said both Jio and Airtel will have a competitive 5G network for consumer mobility and the challenges in 5G adoption for operators are “likely to be in the execution and development of 5G ecosystem (use cases, affordable handsets, etc.”

According to BofA Securities, Jio is looking to replicate the 4G “playbook” which helped it overtake other telecoms, but is lagging in terms of high-end users, who are currently with Bharti and Vodafone Idea.

“While Jio will likely have a first mover advantage with better in-building coverage due to 700 MHz and better offerings like slicing due to standalone network, it remains to be seen on how many postpaid subs would move to Jio,” BofA Securities said. “This is because the high-end base is lethargic and such enterprise contracts are on back of relationships.”

“Nevertheless, we see competition picking up in this base as Jio tries to poach, and Bharti/Vodafone try to defend,” the brokerage said. “We find Vodafone Idea more vulnerable given weak balance sheet and inability to invest to defend its user-base.” Bloomberg