Even with the country’s richest man backing it, India is a while away from 5G adoption

Betting on high odds.
Betting on high odds.
Image: REUTERS/Denis Balibouse
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Mukesh Ambani has placed a big bet on 5G technology, but from where things stand today, the foray will have many challenges even for the country’s richest man.

Yesterday (July 15), Ambani said his telecom venture, Jio Platforms, has developed a 5G solution for India, which will be ready for field deployment next year. This makes Jio Platforms, a part of Ambani’s Reliance Industries, the first-ever Indian company to have 5G capabilities.

But in a country that is still struggling to make the 4G technology work efficiently, what does this capability mean?

What is 5G?

The fifth-generation mobile network, or 5G, is a new standard for wireless networks. “5G enables a new kind of network that is designed to connect virtually everyone and everything together including machines, objects, and devices,” according to Qualcomm, a key player in the global 5G infrastructure market.

A 5G network has faster download and upload speeds, and lower latency (the delay before a transfer of data begins) than 2G, 3G, and 4G. This makes 5G critical for the advancement of technologies such as telemedicine, robotic surgery, smart cities, and self-driving cars, among others.

In addition, fast internet is the need of the hour in India as the Covid-19 outbreak has forced millions of professionals to work from home, which might become a norm going forward.

But the ground reality of internet speeds in India as of now make 5G seem like a distant dream.

Is India ready?

In March, when the coronavirus outbreak picked pace in India, the Narendra Modi government mandated a nationwide lockdown. This meant all companies, big and small, would need their staff to work from home if they wanted to continue running their businesses.

While there were many challenges to enabling work from home in a country that has traditionally not embraced the concept, the biggest hurdles were the poor internet speeds.

“We’re being forced into the world’s largest work-from-home experiment and, so far, it hasn’t been easy for a lot of organisations to implement… the biggest challenge stems from the lack of technology infrastructure,” Saikat Chatterjee, senior director for advisory at Gartner said in a note.

India rolled out the 4G network in 2016. However, three years later, in 2019, the penetration rate of 4G users in the country was only around 44%, according to a market intelligence firm Statista.

Additionally, India’s average 4G download speed of 6.07 Mbps is one of the lowest in the world, as per a 2018 estimate by mobile analytics firm Opensignal.

Besides penetration and speed issues, there are regulatory challenges to the 5G rollout in India.

Money and more

For starters, the government has not yet auctioned any 5G spectrum in the country.

The government has identified 300 MHz of spectrum in the midrange band of 3.3GHz to 3.6GHz. However, the entire midrange band is not fully available for telcos. In this band, space and defence departments have staked claim to 25 MHZ and 100 MHz units, respectively, leaving only 175 MHz of spectrum for telecom operators.

Industry players feel that given the market size in India and dense population this may not be enough.

However, the Modi government has not paid any heed to this issue and repeatedly claimed that there is sufficient spectrum available.

Besides availability, pricing has been a major issue.

The government’s asking base price for the 5G spectrum (in the 3,300-3,600 megahertz band) is higher compared to any other country. At the reserve price of Rs492 crore ($653 million) per MHz, recommended by the Telecom Regulatory Authority of India, telecom operators will have to pay around Rs50,000 crore for 100 MHz pan-India spectra.

That’s a massive ask from companies that have been struggling to make money amid hyper-competition.

Some of the leading players in the telecom sector are under hefty debts and may struggle to raise more money to buy a 5G spectrum. For instance, as on March 31, Bharti Airtel had consolidated net debt, excluding lease obligations of Rs88,251 crore. In addition, telecom players like Vodafone Idea and Bharti Airtel are bracing to payout adjusted gross revenue (AGR) dues more than Rs1.02 lakh crore, mandated by India’s supreme court.

In fact, the government’s ask for the 5G spectrum is so high that even Ambani’s debt-free Reliance Industries has expressed concern over the feasibility of a financially viable business in a price-sensitive market like India.

The Modi administration has, however, maintained that it is in no mood for negotiation. So, earlier this year, Bharti Airtel decided to opt-out from the 5G spectrum auction if the centre goes ahead with the set price.

To make things worse, the Covid-19 pandemic has derailed the Indian economy, which means telecom companies may have added challenges to deal with in the near-term.

China China China

As of now, other than Reliance, Vodafone Idea and Airtel have submitted 5G trial proposals with the government. Most of these trials are proposed to be conducted jointly with either of these companies: Sweden’s Ericsson, Finland’s Nokia, and China’s Huawei and ZTE.

In 2018, Airtel collaborated with Huawei to conduct India’s first 5G network trial under a test setup at the former’s facility in Gurgram. Early this year Vodafone Idea announced a partnership with Huawei, ZTE, Ericsson, and Nokia for the 5G trial.

But the rising tensions on the India-China border make Huawei and ZTE’s involvement risky.

Huawei has been banned from several countries, including Australia and the US, over security concerns. On July 14, the UK said its regulators will implement a ban on telecom operators buying Huawei equipment. “Existing Huawei 5G equipment will need to be removed from the UK’s 5G network by 2027,” it said in a statement.