The design and constitution of 5G are fundamentally different from its predecessors, enabling ultra-low latency, massive machine-type communication and unprecedented data speeds. In view of this, telecom operators are making significant investments in developing robust 5G infrastructure. As per industry estimates, Jio spent over $25 billion in a span of two years on procuring 5G airwaves and deploying countrywide 5G networks while Airtel has reportedly have spent approximately $11 billion to establish its pan-India 5G footprint. Meanwhile, the other two operators in India are still in the early stages of their 5G roll-outs. For instance, cash-strapped Vodaphone Idea (Vi) tested 5G in select Indian cities in December 2024 and has earmarked around $696.34 million to launch its 5G wireless network in the country. Both Vi and Bharat Sanchar Nigam Limited (BSNL) are slated to roll out 5G in 2025.
However, the low-key spectrum auctions held on June 25, 2024 underscored the underwhelming capex by two of the country’s leading telecom players as 5G has yet to generate incremental revenues for telecom operators. No bidding took place in 5G frequency bands like 800 MHz, 2300 MHz, 3300 MHz and 26 GHz. Meanwhile, the 900 MHz, 1800 MHz and 2100 MHz bands attracted bids worth Rs 70 billion, Rs 36 billion and Rs 5.5 billion, respectively.
Further, according to media reports, Jio and Airtel’s cumulative 5G capex is projected to have declined from 37 per cent of their revenue in financial year 2023 to 35 per cent in financial year 2024. An industry report indicates that this trend has been replicated globally too as operators scale back their capex on 5G and fixed broadband technologies. The slowdown in investment by communication service providers (CSPs) is, in turn, impacting the telecom value chain as vendors report a drop in revenues amidst softening sales. For instance, in the fourth quarter of 2024, Ericsson recorded a 28 per cent year-on-year dip in sales to $800 million in its Southeast Asia, Oceania and India markets owing to lower 5G investments by Indian telcos. Industry analysts believe that this is a worrying development as they do not anticipate another investment cycle until 5G monetisation reaches an inflection point. 5G entails significant investments and the Indian telecom industry is already in immense financial distress.
Roadblocks to 5G monetisation
After investing billions in 5G deployment, telcos are expecting returns on their capital employed (ROCE), making 5G monetisation a critical priority. It is also expected to create new revenue streams for CSPs. However, telcos are struggling to migrate their customer base from 4G to 5G. According to the Telecom Regulatory Authority of India (TRAI), during the quarter ended September 2024, India’s 4G data usage accounted for 76.70 per cent of total wireless data usage, as against 22.72 per cent for 5G. A key factor hindering 5G monetisation in India until last year was that telcos offered 5G as part of existing plans instead of launching dedicated tariffs.
Additionally, the regulatory landscape in the country is creating hurdles in 5G monetisation. According to industry analysts, more spectrum is required for effective 5G roll-out. Currently, India is facing a spectrum deficit of about 1200 Mhz, and this is likely to hamper roll-outs going forward. There is also a sentiment among industry players that spectrum allocation to telcos through auctions may make 5G economically unviable for enterprise customers.
Another major gap is the inadequate fibre infrastructure in the country. Industry reports suggest that tower fiberisation in India stands at 44 per cent, falling short of the National Broadband Mission’s (NBM) goal of 70 per cent fiberisation by 2025. High costs for laying cables and towers in some states along with bureaucratic delays in obtaining clearances have contributed to this gap. Low fiberisation impacts 5G service quality in terms of voice performance and speed. In addition, over-the-top (OTT) players remain outside TRAI’s legislative jurisdiction, limiting the scope of 5G monetisation as their content pricing remains deregulated. This prevents telcos from generating revenue from OTT players who continue to make profits using telcos’ networks.
Further, the enterprise segment was considered a key driver for 5G monetisation, particularly through private 5G networks and network slicing. However, 5G implementation has not taken off as expected. As per industry estimates, India only has 10 private networks so far, as compared to 170 in the US. One of the reasons why enterprises are reluctant to deploy 5G private networks is their current reliance on legacy connectivity offerings – Wi-Fi and wired-based solutions – and transitioning to the 5G network would entail additional costs. Moreover, most enterprises remain uncertain about 5G benefits in terms of efficiency and productivity. Further, 5G use cases such as IoT, smart cities and Industry 4.0 are still in their early stages and have yet to achieve scale.
5G monetisation strategies
Offering 5G at differential tariffs than 4G is the first step in the roadmap to 5G monetisation. However, as progressive technological renditions of 5G emerge in the future (such as 5.5G), operators must consider creating a more compelling case for their customers to establish new revenue models such as usage-oriented pricing strategies. For instance, hourly or per session subscriptions could be a better approach to capturing revenue from gamers. Another innovative option could be profitable revenue-sharing models with other players in the ecosystem including OTT players, cloud-service providers and gaming companies.
Further, for players like BSNL and Vi, which are just venturing into 5G, transitioning to 5.5G-ready equipment might be a better option to maintain their competitive edge and maximise their ROCE. Efforts should also be made to promote infrastructure sharing to reduce capex/opex while expediting 5G-ready infrastructure development in the country. According to a study, sharing of passive infrastructure can lead to cost savings (both capex and opex) of 16-35 per cent while active infrastructure sharing can result in up to 45 per cent cost savings.
For tower fiberisation in India, studies project significant investment requirements of approximately $26.83 billion to fiberise 70 per cent of its existing towers and an additional $30.49 billion to build 1.5 million new towers by the end of 2025. In addition, NBM 2.0 aims to streamline bureaucratic processes and reduce regulatory complexities. To this end, it seeks to cut the average disposal time for a right-of-way application from 60 days at present to 30 days by 2030. Meanwhile, telecom operators have started utilising low-cost wireless solutions (such as wide-band microwave links) that seamlessly harness high-frequency radio waves to transmit data.
The government may also explore the idea of conducting a dedicated spectrum allocation at reasonable costs for private 5G deployments, without undermining telecom operators. This month, TRAI has suggested allowing private corporations to establish private 5G networks independently through direct access to spectrum. If the government approves this proposal, these entities could set up captive private 5G networks at costs nearly 40 per cent lower than the traditional approach of relying on telcos.
Additionally, in April 2024, TRAI had recommended executing authorised shared access technique-based spectrum sharing in India. Under this approach, spectrum that has been assigned to government agencies or other entities in the internationally harmonised spectrum bands for IMT services can be assigned to access service providers as secondary users. It also explored the possibility of allowing spectrum leasing and inter-band spectrum to address the anticipated spectrum shortage in the country.
For successful 5G monetisation, improving network coverage and reliability is critical. Further, research and development efforts must be increased towards identifying industry-specific use cases for 5G. These include deploying 5G for remote surgeries in healthcare, asset tracking in logistics, transitioning to cashier-less stores in retail and real-time quality control in manufacturing. Accurate positional information is crucial for for optimising operational efficiency and fully leveraging the advanced features of a 5G network. Meanwhile, securely integrating 5G with other emerging technologies like artificial intelligence, the internet of things and edge computing will be crucial for improving 5G’s efficiency and identifying more use cases.
Conclusion
At the core of India’s Digital India vision, 5G is expected to contribute approximately $455 billion to the country’s economy between 2023 and 2040. However, for 5G adoption to gain traction in the country and a new capex investment cycle to emerge, 5G monetisation is critical. Monetising 5G can be quite a game changer for the country as telecom service providers stand to gain from new revenue streams while businesses can benefit from enhanced productivity.
However, the industry is facing some teething troubles such as high capital costs, inadequate supporting infrastructure and regulatory bottlenecks. Successful 5G monetisation will require a collaborative effort, wherein the government identifies and eases legislative and administrative hiccups while the industry explores ways to maximise its ROCE on 5G investments. This would involve a mix of strategies such as innovative pricing models, aggressive marketing campaigns to drive adoption and identification of new 5G applications.
