A recent report in a leading magazine a few months back claimed that the introduction of 5G in India will literally revolutionize telecom. 5G is the fifth generation of bandwidth which is perfectly suited to high intensity mobile usage and the massive spread of data, audio and video content. But how feasible is the entire plan really?
Not for now, at least
In a recent report on the launch of 5G services in India, Moody’s has estimated that the auctions for 5G is unlikely to happen before the second half of 2020. Even about that, Moody’s is not overtly optimistic. The reasons are not far to seek. Indian telecom has just seen a recovery in ARPUs and their financials are still in a lot of stress. ARPUs had dipped to below the Rs.100 mark and it has just about bounced above that mark in the last quarter after Bharti Airtel and Vodafone took a conscious decision to weed out low value customers. But it is still a long way away from generating healthy ROA and ROE. Then there is the issue of massive debt in the books of these telcos. Currently, the telecom companies put together have a total debt of nearly Rs.4.35 trillion. The government proposes to auction the 5G bandwidth (3.3 to 3.6 GHz band) at a total price of Rs.5 trillion. Moody’s is of the view that with the current balance sheet stress, there is no way any of the telcos are going to be in a position to commit that kind of auction fees.
Learn from global experience
One thing that India needs to really do is to learn some quick lessons from the global experience. In Asia, other emerging economies like Indonesia and Malaysia are also in consultation with the telecom operators and are likely to initiate 5G auctions only in the second half of 2020. India may have to look at these experiences as a benchmark and hence the 5G auctions are likely to be delayed. Then there is the issue of spectrum pricing. Most countries have historically priced spectrum at low rates to make the entire business proposition feasible. But, India plans to keep rates steep and so viability becomes the big question. Price may be too steep!
Where are the big applications?
That is, perhaps, the billion dollar issue. What exactly does India do with 5G at this point of time? Where exactly can it apply because for 5G to be a viable proposition, you require applications of that order and scale? That is the biggest challenge. For example, 5G can really find applications in advanced segments like medical services, robotics, home automation through smart devices etc. Then there are multi-dimensional services like Internet of Things (IOT) where 5G can really find application. Moody’s is right that India may be putting the cart before the horse. It is time to first put out telecom house in order. 5G can certainly wait! ©