By Dominick Rodrigues

Mumbai : The Department of Telecommunications’ nod to conduct 5G trials for six months in India is a +move towards implementation of 5G in India over the medium term+, according to Priyanka Bansal, Associate Director, India Ratings and Research (Ind-Ra).

“Although 5G spectrum is yet to be auctioned, telcos have been allowed to perform testing in the mid band (3.2-3.67GHz), millimetre wave band (24.25-28.5GHz) and sub gigahertz band (700GHz) along with their existing spectra in the 800MHz, 900Mhz, 1,800MHz and 2,500MHz frequencies, during this trial phase,” Bansal stated while noting that the move will also help determine the viability of this new technology across the nation, since the telcos are required to conduct trials not only in the urban areas but also in the rural and semi urban areas.

“However, the agency believes that there are still a lot of variables and unknowns that need to be addressed for the successful implementation of 5G in India. First, the reserve prices for 5G auctions are too high. Although the 5G auctions are not yet announced, the reserve price could yield a return on capital employed of only 7%.”

“Secondly, the number of users willing to switch to 5G from 4G/ 2G and the incremental average revenue per user (ARPU) that they are willing to pay needs to be watched out for. With the current ARPU ranging between Rs121-166/user/month, and more than 350 million subscribers still using voice only/ 2G services with significantly lower ARPU, the viability of 5G for the telcos remains to be seen.”

“Thirdly, the extent of capex these telcos will incur on 5G over the coming years will also be a key monitorable, although the financial credit profile of Reliance Jio Infocomm Limited (‘IND AAA’/Stable), Bharti Airtel Limited (debt rated at ‘IND A1+’) is comfortable.”

“The Department of Telecommunications has permitted four telcos — RJio, BAL, Vodafone Idea Limited and Mahanagar Telephone Nigam Limited to conduct trials for the initial duration of six months — including two months for the procurement and setting up of equipment. Telcos are already gearing up for 5G implementation for the last six-12 months, wherein RJio is already working on using an indigenously developed network, hardware and technology, and BAL has announced of the successful demonstration of its live 5G services over a commercial network in Hyderabad in February 2021,” Bansal stated in a release.